Fearing risks, CBRC warns rural lenders

09:42, March 19, 2010      

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The China Banking Regulatory Commission (CBRC) has urged rural financial institutions to guard against financial risks, according to a statement posted on the CBRC's official website Thursday.

The CBRC warned that rural small- and medium-sized financial institutions should conduct comprehensive evaluations to prevent credit risks associated with projects in the real estate sector and other sectors that are highly energy-consuming, highly polluting, or facing overcapacity.

Chinese banks increased loans to 9.59 trillion yuan ($1.4 trillion) to support the government's stimulus package last year, a 31.74 percent year-on-year hike that has spurred market concerns on the quality of bank assets.
The government work report issued early this month set a target of optimizing China's credit structure and fixed a target of 7.5 trillion yuan ($1.1 trillion) for new loans this year.

The People's Bank of China, the central bank, raised the reserve requirement ratio (RRR) for large commercial banks in January and February to 16.5 percent. But smaller and rural financial institutions' RRR remained unchanged at 13.5 percent in order to support farming and agricultural projects.

Agricultural outstanding loans in these rural financial institutions reached 3.1 trillion yuan ($453.88 billion) in 2009, the largest increase in history, the CBRC said.

A total of 62 new rural commercial banks and rural credit unions were established last year, and the amount of non-performing loans (NPL) outstanding decreased by 86.2 billion yuan ($12.62 billion) and the NPL percentage rate dropped by 5.1 percentage points compared with the beginning of the year.

The total deposits and loans in rural financial institutions were 7 trillion yuan ($1.02 trillion) and 4.7 trillion yuan ($688.14 billion) respectively, and profits of 71.6 billion yuan ($10.48 billion) were achieved in 2009, according to the CBRC's statement.

Source: Global Times
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