Banking regulator warns on rising risks

The China Banking Regulatory Commission has urged banks to pay close attention to the credit risks in key industries affected by the economic downturn and hit by overcapacity woes.

Those industries include real estate, construction machinery, iron and steel, wind power equipment, and photovoltaic cells. In addition, the CBRC also stressed the risks to companies that are expanding fast, heavily indebted, highly leveraged and funded by private equity.

Experts estimated that the outstanding loan portfolio of those industries might amount to around 30 to 40 trillion yuan ($4.83 to 6.44 trillion).

Bank head offices have now taken back the credit approval rights for property development projects and industries with outdated production capacity or overcapacity, the China Securities Journal reported on Monday, citing a spokesperson for a commercial bank.

Analysts said that despite a cautious stance by some banks, the risks associated with those industries are still manageable, and that creditors' rights will not be affected in case of consolidation within those sectors.

However, they added, banks will be forced to adjust their credit structure in accordance with the economic restructuring process.

Chen Yuan, chairman of China Development Bank, has said that his bank will guard against the risks in the solar power sector, and will curb new loans to solar panel manufacturers.

Meanwhile, Xiao Gang, former chairman of the Bank of China, noted that the iron and steel industry was also on the credit control list.

The CBRC also asked major commercial banks to check their wealth management products, and to submit a report by the end of June.

Previous reports said the CBRC would release risk-check guidelines for wealth management products, focusing on seven aspects, including design, sales, information disclosure and revenue.