The regulator of insurance, commercial and investment banks in China, China Banking and Regulatory Commission (CBIRC) has issued a warning suggesting banks in the country are facing an increasing threat of bad loans which are mainly due to uneven methods of recovery used by the financial institutions.
The regulator claims that bad loans are at a risk of increasing in the future due to current economic recovery which is unbalanced and lacks a strong foundation.
The regulator said as of end June 2021, outstanding non-performing loans in the country stood at 3.5 trillion yuan ($540.79 billion) which denotes an increase of 108.3 billion yuan from the beginning of the year.
CBIRC bad loan ratio had decline by 1.86% in the month of June compared to the first month of the year. The regulator has been providing banks with guidelines to increase provisions and ramp up of bad assets.
The regulator said its expecting bad loans disposed in the first half of the year to be greater than those disposed at a similar period last year.
“Chinese banks are expected to see an increase in profit growth in the first half of this year due to a low comparison with the previous year when the COVID-19 pandemic disrupted businesses. Total assets of the banking sector rose 9.2% year-on-year to 328.8 trillion yuan by the end of June, while total liabilities grew 9.1% to 301 trillion yuan,” added the regulator.