Fitch Ratings warns Chinese banks
Updated: 2011-08-31 14:00
By Qiang Xiaoji (chinadaily.com.cn)
China's banking industry may risk facing significant pressure in the future, Fitch Ratings warned during the 2011 Sovereign and Banking Seminar in Beijing Tuesday, China Business News reported Wednesday.
Except for loans through local financing platforms and real estate loans, Chinese banks should not underestimate the risk exposure of infrastructure facility loans, said Zhu Xialian, senior director with Fitch Ratings (Beijing).
For Chinese banks, assessing the risk exposure of the combined credibility of local governments is more important than focusing on the risks of local financing platforms, Zhu said.
Zhu explained that if local governments have difficulties in paying back loans, contractors and subcontractors of infrastructure projects may be affected. Loans for the industries of transportation and infrastructure may also be affected.
According to Fitch Ratings, currently, five Chinese banks - Industrial and Commercial Bank of China (ICBC), Bank of Communications, Bank of Beijing, China Construction Bank and Bank of China - have the highest rates of infrastructure facility loans compared to their total loans. Infrastructure facility loans extended by ICBC account for almost one third of its total loans. However, the bank's platform loans only account for 8.7 percent as of the middle of this year.
Asset quality and the rapidly expanding off-balance sheet transactions also cast a shadow on the future of Chinese banks, Zhu warned.
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