Chinese banking fines up nearly sixfold in 2017

CBRC head Guo Shuqing has not been letting up in the crackdown.

Reuters reports that the fines levied by the country’s top financial regulator have surged since Guo Shuqing took the helm of China Banking Regulatory Commission (CBRC) in February 2017, ballooning nearly six times from the cumulative penalties imposed over the past 14 years, according to a report released by UBS. 

The exponential increase in penalties bares the more stringent enforcement of banking regulations as the country undergoes its THIRD year of deleveraging to curb systemic risk in the financial services sector.

Also read: China's shadow banking assets plunged to $393.40b in H1

The National Audit Office unveiled violations by major banks in June including Industrial and Commercial Bank of China Ltd, Agricultural Bank of China Ltd, and China CITIC Group Co. who extended loans, discounted bills and gold leases to unqualified companies and invested funds from wealth management products into banks’ non-public issuance of preferred shares through the use of trust and other channels, amongst other illegal shadow banking activities.

At least 65% of the recent fines have been issued in relation to the bank’s nonperforming loans (NPLs), added UBS. However, the current clapdown is expected to discourage future efforts to understate the amount of bad loans.

The NPL ratio for the banking sector hit a nine-year peak after standing at 1.86% as of end-June, with bad loans spiking to $26.62b (CNY183b) for the April-June period. Smaller players bore the brunt of the burden but state-owned big banks were able to hold their bad loan ratios steady in their half-year financial results announcements.

Also read: More bailouts loom as staggering bad loans batter Chinese rural banks

Here’s more from Reuters:

Photo from World Economic Forum from Cologny, Switzerland - Guo Shuqing CC BY-SA 2.0