21 February 2020

Market overreacting to shadow banking, bad loans, bankers say

Investors are worrying too much about shadow banking and bad loans and making them out to be worse than they look, top banking executives said Friday. 

“The appearance of shadow banking shows that China needs more than a single financing option,” Liu Xiaochun {劉曉春}, chief executive of Agricultural Bank of China Ltd. (01288.HK, 601288.CN) (Hong Kong Branch), told a meeting of accounting body CPA Australia.

“The risk in shadow banking is not as big as people think. The evaluation standard in shadow banking is similar to that in traditional banking,” he said.

“After financing channels have been diversified, regulators will respond to innovative financial products.” 

Zhu Qi {朱琦}, chief executive of Wing Lung Bank Ltd., said he is not worried about the non-performing loan (NPL) situation because NPL levels in most major Chinese banks are below 1 percent and internal supervision and risk control in these banks are well established.

Industrial and Commercial Bank of China Ltd. (01398.HK, 601398.CN) saw its NPL ratio climb 0.06 percentage point to 0.91 percent at the end of September. China Construction Bank Corp. (00939.HK, 601939.CN) had it at 0.98 percent, down 0.01 point, according to regulatory filings.

Andrew Fung, executive director and head of global banking and markets of Hang Seng Bank Ltd. (00011.HK), said China should strengthen the bond market in order to diversify financing channels.

 – Contact HKEJ at [email protected]