The loan targets recently proposed by the chairman of the China Banking and Insurance Regulatory Commission (CBIRC) are not mandatory for every Chinese bank and will not have much impact on their bad debt ratios, said a report of China Securities Journal on Monday.
Last week, the media reported three targets set by the chairman of the CBIRC for new commercial loans from China’s banks.
According to these three targets, large banks should give no less than one-third of their new commercial loans to private enterprises, and this ratio should be no less than two-thirds for their small and medium-sized counterparts; three years from now, no less than 50 percent of new commercial loans should go to private enterprises.
These three targets will not serve as a standard for the regulation and assessment of banks and will not require every bank to meet them, said the Monday report quoting its source from the banking regulator.
The above targets are a call for banks to improve the structure of their loans, said Zeng Gang, an economist of the National Institution for Finance & Development, a think tank in China.
Rather than asking banks to increase the total sum of loans granted, these targets mean for them to try to withdraw funds from other sectors and recipients or to divert such funds to private enterprises, he said.
The above source also said that the lending standards of banks would not be lowered.
Zeng said the above three targets would not have much impact on banks’ non-performing loan ratios.
In the short term, many banks in China are performing fairly well with a decline in their bad debt ratios and their strong profits can help withstand some rising risks, if there are any; in the long term, if those private enterprises with a good prospect can be lifted out of the temporary difficulties they face, loans granted to them will not be in default in the future, according to his analysis.
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