China’s financial system remains healthy

Spanish bank expects non-performing loans to rise gradually, however.

Banco Bilbao Vizcaya Argentaria, SA, Spain’s second largest bank, said that despite rising risks from lending in the real estate sector and the growth of shadow banking, China’s overall financial system remains healthy.

BBVA said that while it would agree with the assessment of a healthy financial system at present, it does expect bank profits and non-performing loans to rise gradually in the coming years.

It noted that a report by the People’s Bank of China, the central bank, recommends a further strengthening of regulations in the shadow banking sector and the establishment of a deposit insurance scheme to facilitate a planned liberalization of interest rates.

BBVA said these steps have been factored into its baseline expectations of reforms over the coming three to five years.

BBVA has recently focused on overseas expansion, and now operates in 40 countries. Like many other Spanish companies, it enjoys a dominant position in Spanish-speaking Latin American countries.