Chinese authorities had warned that its banks could face financial problems due to its bad debts. Beijing had already pushed banks to raise funds from private capital to prevent another government-sponsored bailout. The figures, however, on Reuters Factbox revealed that the situation may not be as bleak as it seems.
The China Banking Regulatory Commission said that as of the end of June, only 0.96% of commercial bank loans were non-performing. Analysts put the ratio closer to 3% to 6%. Chinese banks, meanwhile, had funds amounting to CNY1.57 trillion or USD 257 billion set aside to cover for loan losses. The amount was equivalent to 2.81% of total loans and could cover 3.5% of non-performing loans.
At the end of June this year, the Chinese commercial banking system had raised total capital levels of CNY 8.75 trillion. This was equal to 15.6% of overall bank loans. Assuming a recovery rate of 20%, the capital would also be able to absorb 19.5% of non-performing loans.
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