The China Banking Regulatory Commission schedule for revising the loan agreements
A person with knowledge of the matter, declining to be named because the information is confidential said China’s banking regulator ordered lenders to accelerate debt collection and told them they haven’t set aside sufficient funds to cover losses on loans to local governments. The person said the lenders were told that they are lagging behind the China Banking Regulatory Commission’s schedule for revising the loan agreements on infrastructure projects this month.
After construction is completed, the agency had asked banks to collect two repayments a year. The comments reflect persistent concerns that $1.7 trillion of lending to local governments can spur a wave of bad debts. The bad debts could lead to the nation’s third banking bailout in less than two decades. Standard & Poor’s estimates as much of 30 percent of the credit may sour after a surge in lending that powered China’s recovery from the global financial crisis.
A Hong Kong-based analyst at Barclays Capital Inc. May Yan said “on the local government debt risk, the banking regulator get tougher, and that should to extent increase the pressure on banks to boost their provisions.” The regulator said in an e-mailed to Bloomberg efforts to curb risks in the loans have achieved “the overall risk and initial results is controllable.” it said Going forward, banks should get better collateral , amend debt agreements, and refine calculations on capital levels with based on risk-weightings assigned to such loans.