China Steps Up Loan Relief, Delays Risk Exposure to Help Economy
Bloomberg News-
Banks delay repayments on 1.5 trillion yuan of loans this year
-
Risks from forbearance may be exposed this or next year
Chinese banks have offered relief on 3.9 trillion yuan ($551
billion) of loans since the outbreak of the coronavirus pandemic to help
struggling small businesses and bolster an economy facing its worst
slump in four decades.
Lenders
have postponed taking principal repayments on 1.44 trillion yuan in
loans to almost 800,000 small businesses and pushed back 65.4 billion
yuan in interest payments as of May 31, according to a China Banking and
Insurance Regulatory Commission official who asked not be named citing
internal policy. Banks also rolled over 2.4 trillion yuan in financing
to small businesses.
China’s $41 trillion banking system is at the forefront of
propping up companies hurt by the outbreak of coronavirus and the impact
from its global spread. Authorities are now pushing the financial
industry to sacrifice 1.5 trillion yuan in profit this year by offering
lower lending rates, cutting fees, deferring loan repayments and
granting more unsecured loans to small businesses.
As part of the forbearance polices, banks have been granting
payment delays on loans maturing after Jan. 25 and regulators recently
extended the deadline on the preferential policy to March 31 next year.
Still, under current accounting rules, banks can book
the interest income when they were due even though the actual repayments
were delayed, the CBIRC official said, adding that such risks haven’t
been reflected in banks’ pr.
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