Guiyang Rural Commercial Bank capital wiped out after tightening loan rules

Surging bad loans pushed CAR down from 11.8% in 2016 to below 1% by end-June.

Bloomberg reports that Chinese rural bank Guiyang Rural Commercial Bank Co., had almost all its capital wiped out as bad loans which ballooned from $126.93m (CNY841m) to $1.18b (CNY7.8b) prompted the capital adequacy ratio (CAR) to plummet below 1% by end-June.

Also read: Are smaller banks bearing the brunt of China's bad loan problem?

Guiyang Rural’s woes stem from a recent policy requiring lenders to classify as non-performing all loans that are overdue for more than 90 days.

Such overdue loans accounted for almost a fourth (24%) Guiyang Rural’s total advances in 2017, resulting in a fourfold jump in the bank’s NPL ratio, according to credit rating agency China Chengxin International Credit Rating.

Also read: Chinese banks bad loans surge to $292.55b in May

Other smaller Chinese banks which remain vulnerable to the same risk should they top up bad-loan provisioning to 150% of NPLs, include Bank of Liuzhou Co., Shandong Guangrao Rural Commercial Bank Co. and Laishang Bank Co.

Here’s more from Bloomberg:

Also Read

Tighter policies drag South Korean household loan growth in September

SME loans in Taiwan rose in August

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

I want to download the media kit