China Banking Regulatory Commission (CBRC) has asked the country's lenders to reassess their risk exposure and inform to borrowers by the end of June to avoid more bad loans, reported Bloomberg.
Liu Mingkang, chairman of the CBRC, said that by the end of June 2010, all of the banks should submit comprehensive reassessment reports about their risk exposure.
He said that inspectors will visit banks in the third quarter to check on the reports and by the end of the third quarter assets will be downgraded if needed and provisions will be increased.
Mr Mingkang added: “In cases where principal-plus-interest-due exceeds cash flow, modifications will be made to loans including increased collateral.In the third quarter of this year, the CBRC will send on-spot inspection teams to examine individual loan cases, accounting for 36.5% of the new credit dispersed last year.
“In Beijing, some banks already implemented the differentiated lending policies on their own. For those buying a second home or more, some banks asked them to pay at least 60% of the cost as a down payment,” reported cctv.com.
The deadline mirrors apprehension that borrowing by local governments and last year’s $1.4 trillion in lending is again causing asset bubbles and may lead to soured debts. According to estimates of Victor Shih at Northwestern University, local- government entities may have had CNY11.4 trillion in outstanding debt by the end of 2009.