This past year has been difficult for Chinese banks, and the country’s central bank, People’s Bank Of China, said that about 13 percent of the country’s financial institutions were considered “high risk,” according to Bloomberg.
People’s Bank Of China ran a report — its 2019 China Financial Stability Report, published on Monday (Nov. 25) — and found that about 586 banks and financial institutions were highly risky, and in need of some sort of change. Though no specific banks were named, one got a score of “D,” meaning it was taken over or it went bankrupt.
In May, a lender was seized, as the financial stability of smaller banking institutions continues to worry experts. The report also showed that the state was not always willing to bail out banks. Adding to the concern is the fact that China’s economy has slowed to its lowest point in about 30 years, as well as the protracted trade war with the U.S.
Due to the troubles, the banking sector in the country seems poised to see shrinking lending margins, and a potential for a large amount of bad debt. Private and foreign banks are not facing the same types of issues, the report said, but rural lenders were marked “high risk” by more than 30 percent.
People’s Bank Of China said it reached out to each bank and let them know about the rating, asking some to make changes to capital or to get rid of bad loans.
The report said that some potential risks take time to repair, and that they can “occur easily.” In addition, the slowing economy will only make it more difficult to stave them off.
Furthermore, the report said that the People’s Bank Of China should “stay cool-headed,” and take into account both economic growth and risk control. The central bank said it would continue to refine its policies to keep up with the changing economic situation in the country.