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From July 1, banks must classify assets beyond the currently
required loans - including bond investment, interbank lending
and off-balance-sheet assets - into five categories ranging from
"normal" to "loss", according to rules published by the central
bank and the banking and insurance regulator.
The rules will help "commercial banks evaluate credit risks more
accurately and reflect the true quality of their financial
assets," said the People’s Bank of China and the China Banking
and Insurance Regulatory Commission (CBIRC).
Current rules are inadequate because "in recent years, the asset
structure of China's commercial banks has changed quite a lot,
and risk classification faces many new situations and problems,"
the CBIRC said. The new rules, it said, will help prevent credit
risks more effectively, the regulator said.
The rules will apply to banks' new business. They have until the
end of 2025 to reclassify existing financial assets.
The authorities had already urged banks to step up lending and
bond purchases to support recovery in the world's second-biggest
economy, after a surge in COVID-19 infections and problems in
the vast property sector. New bank loans jumped more than
expected in January to a record 4.9 trillion yuan ($720
billion).
Saturday's rules urge banks to scrutinise the underlying assets
when they classify risks for asset management or securitisation
products.
Lenders will also be required to strictly abide by the rules
when assessing credit risks in debt restructurings. An
increasing number of property developers face restructuring as
they struggle to meet repayment obligations.
Commercial banks should perform risk classification of all
financial assets at least once a quarter, and they must
"strengthen the monitoring, analysis and early warning" of the
risks, and take preventive measures in a timely manner, the
rules say.
(Reporting by Shanghai Newsroom; Editing by Clarence Fernandez
and William Mallard)
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