China mulls lower bad loan coverage ratio

China copy



China’s regulators are discussing a possible reduction in the amount of provisions that the country’s banks must set aside for their bad loans, the chairman of China Construction Bank Corp. said on
A reduction in the bad loan coverage ratio to about 120 percent to 130 percent would be “reasonable” and “possible,” Wang Hongzhang told Bloomberg News on the sidelines of an event in Singapore. He said the regulator “may differentiate among different banks on ratios.”
The China Banking Regulatory Commission currently sets the minimum statutory coverage ratio for bad loans at 150 percent.
China’s large banks, which are due to report first quarter results this week, have less room to smooth out their earnings after letting their coverage ratios for bad loans — a key swing factor in earnings reports — fall close to the regulatory minimum.
Wang said any reduction in the coverage ratio wouldn’t have a big impact on CCB’s earnings.

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