China Orders Banks: All Loans Past 90 Days Become NPLs

Caijing: 监管明确逾期90天以上贷款计入不良 已有银行执行新要求

On June 7, the reporter of “Daily Economic News” learned from the industry that recently the regulators have required all banks to include over 90 days’ overdue loans as non-performing loans. A joint-stock banker revealed to reporters that this was explicitly requested last month, not for a particular bank, but for all banks.

“We have just received the documents from the head office.” Another person from the branch of the joint-venture bank in East China said, “Our head office has issued a document clearly, starting from the date of issuing the document.” Another person from a large state-owned branch risk management department confirmed that "We two weeks ago, the provincial government organized a special meeting to convey the new policy."

However, the reporter did not receive the corresponding regulatory documents. According to the new requirements, loans over 90 days overdue will be included in the sub-loan at least in the five-category loan classification. The proportion of loan loss provisions for various types of loans will increase accordingly.

The big 4 banks are not a concern:

The four state-owned banks have already implemented

"Daily Economic News" reporter at the same time learned that the state-owned top four banks (industry, agriculture, Chinese, and construction) have already included over 90 days overdue loans as non-performing loans. According to a person from a state-owned bank’s head office, the overdue 90 days were badly allocated. The bank had stipulated a number of years ago. “We are more than 90 days old and the system is automatically transferred to bad.”

According to the observation of the risk management department of the above state-owned Daxing Branch, the regulatory requirements are now becoming more and more stringent, this time being systematically adjusted in batches.

Smaller banks are a concern:

Some banks have a greater degree of deviation

In practice, banks determine that the normal and bad standards are not the same, but according to industry experience, this “over a certain period of time” usually refers to more than 90 days.

At the beginning of March 2017, when Guo Shuqing, the then chairman of the China Banking Regulatory Commission, unveiled the press briefing at the New State Office, he pointed out: “Frankly, (non-performing loans) may not be counted in, such as those overdue for more than 90 days. Concern loans, but even if they are put in, there is no big change in the rate of NPLs.

Judging from the data in 2017, some joint-stock banks and city commercial banks have not included all loans overdue for more than 90 days in non-performing loans. According to the statistics of the reporter, the proportion of non-performing loans of some joint-stock banks was only about half of the loans overdue for more than 90 days, and the degree of deviation of loans over 90 days overdue and bad loans was relatively large.