Qilu Bank Denies Licheng Overdue Debt Is Government Debt

Foreign media played up the dispute between a bank and the local government. That narrative may be false.

地方政府债务违约首次曝光？

Qilu Bank previously released 2013 report shows, Licheng District, Jinan City Construction Comprehensive Development Company (hereinafter referred to as "historical city urban construction") 35,070,000 principal amount of the loan defaults and interest owed up to 6.13 million yuan, five are classified as doubtful loans and has litigation.

"Doubtful" means the borrower can not repay the loan principal and interest, even when guarantees are sure to cause greater damage. While some market participants believe that this is the first disclosure of bank loans to local government financing platform default, but denied Qilu Bank loan for local financing platform loans.

Denied local financing platform loans default

After the deep vortex of public opinion, Qilu Bank on July 2 issued a statement saying, Licheng urban construction has never been included in the financing platform mechanism, the loan is also non-government financing platform loans. Although there are some government background, but to carry out their business activities, is completely independent, self-financing, not a springboard for local government financing, the return of the bank's loan funding sources, but also from its own operations.

Business information, City Buildings built stand calendar 1992 with a registered capital of 18.06 million yuan, Jinan City was established as a wholly-owned Construction Authority. General business items include new construction, the transformation of the old range of real estate development, marketing and management services offered, rental housing.

It is understood that the company currently has no development projects in recent years, mainly engaged in its own name for the lease of real estate.

In fact, in 2012, urban construction has begun Licheng interest owed. The end of 2012, Licheng urban construction in the principal balance of the loan Qilu Bank's 35.1 million yuan, while the outstanding principal, interest owed 2.49 million yuan, but has, as a sub-category loan classification and 2012 Qilu Bank has filed litigation.

2013, Qilu Bank loan reduced from substandard to doubtful, due to interest rate has risen to 6.13 million yuan. According to Qilu bank loan rating categories, sub-categories represented the repayment ability of the borrower appears obvious problems, rely entirely on their normal revenues to pay back the loan principal and interest, even if the implementation of the guarantee may also cause some loss; Doubtful said borrowers people can not repay the loan principal and interest, even when guarantees are sure to cause greater damage.

According to the "First Financial Daily" reporter, after the establishment of the historical city urban construction, are carrying out with the Qilu Bank business, but business is relatively dispersed, the amount is small, by way of security are also different. To 2002, Qilu Bank Licheng dispersed urban construction business in a number of agencies to integrate the centralized sales department to handle. The urban construction loans guarantee Licheng Licheng gradually fixed by urban construction to provide collateral security, as well as by the Jinan City Urban Construction Investment Co., Ltd. ("Jinan City Investment") to provide joint liability guarantee.

Qilu Bank, 2005, Licheng urban construction to Qilu Bank for three items totaling 35.2 million yuan loans to name two loans secured by real estate to provide guarantees for which a sum of 15 million yuan loans by the Jinan City voted to provide guarantees. To 2008, the business process extension, extension 2010 expires after compression 100,000 yuan, the remaining 35.1 million yuan loans handled by the new-old procedures, guarantee still two pen collateral, a Jinan City investment guarantees. The loan in February 2012 there have been past due, according to the law to be followed Qilu Bank taken to court and won.

And to provide security for urban construction in Jinan City Licheng vote is financing platform has been included in the list, but the bank said in a statement Qilu, Jinan City investment has been included in the list, although financing platform, but this transaction is a continuation of the history of business, with normal business related, not financing platform loans.

But regardless of whether the local Licheng urban construction financing platform, in fact, as early as in 2010, banks have begun to compress Qilu local financing platform loans. Qilu Bank report shows that in 2010 Qilu Bank to recover by taking compression, conversion and other measures to clean up government financing platform loans, vehicle loans fell to 095 million yuan of 670 million yuan.

Ferocious local debt

The risk of local financing platform still can not be ignored. June 24, central bank vice governor Liu Shiyu said that the current domestic part of the financial risk of the more prominent areas or areas for potential financial risks should strengthen monitoring and analysis, resolve disposal of financial risks.

Among them, Liu Shiyu mentioned risk areas should continue to strengthen the local financing platform debt, all kinds of shadow banking, mutual insurance companies and other UNPROFOR monitoring and analysis, dynamic investigation of potential risks.

Prior to the National Audit Office audit report shows that by the end of June 2013 to the end of March 2014, nine Sheng Benji and nine first municipal government debt grew by 3.79% balance audit, more than six months of 2013, the average growth rate fell 7 percent. In addition, Sheng Benji old debt by the new larger amounts, 9 Sheng Benji to borrow new debt to repay maturing debt 57.93 billion yuan, 821 million yuan is still overdue.

Audit report also shows that until the end of June 2013, the national governments bear the responsibility to repay the debt 20.7 trillion yuan, bears WARRANTY 2.9 trillion yuan of debt, debt relief may bear some responsibility for 6.65 trillion yuan.

Central bank had issued the "China Financial Stability Report 2014," said the 2013, non-performing loans of banking institutions to maintain a low level, but the risk of local government financing platform, real estate and industries with excess capacity can not be ignored. Local government financing platform loans debt gradually entered the peak period, approximately 37.5% of the loans due in 2013-2015 years.

"Slowdown in economic growth in the context of the entire banking sector non-performing loan balance increased by greater pressure, compared with the rate of overdue loans steel, nonferrous metals, wholesale and other industries, the overdue rate many local financing platform." One bank industry to the "First Financial Daily" reporters.

In addition, under the Commission has pre-disclosure of part of the City firm's prospectus, the local financing platform loans, Bank of Hangzhou, Bank of Shanghai, Jiangsu Bank have indicated that non-performing loans as at end of last year, while the bad bank said low Guiyang government financing platform The average non-performing loan levels.

In the low-risk and high-profit, driven by domestic commercial banks still invest the funds through various channels of government financing platform. Audit on the part of the bank's audit report, audit tracking eight bank lending conditions and found that there are 374.988 billion yuan loans through collaboration with industry, financial and other types of credit funds to invest in the country to limit local government financing platform companies and real estate companies.