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Chinese Banks:Readacross from two NPL hiding cases

2019-10-09 15:28

欧洲杯竞彩官方平台,What happened?

    The CBRC recently imposed notable fines in two NPL hiding cases: in one case,it fined the Chengdu branch of Shanghai Pudong Development Bank (SPDB)Rmb462mn last Friday for covering up NPLs worth Rmb10bn by granting creditfacilities to more than 1,400cell companies. According to Caixin, a typicaltransaction goes like this: when Corporate A is about to default, Corporate Bacquires Corporate A, and SPDB makes a new loan to Corporate B, which thenrepays the interest expenses for Corporate A. The Rmb462mn fine and newNPLs were recorded in the full-year 2017financials, which made up 0.85% ofnet profit and 0.31% of the loan book.

    In the other case, the China Banking Regulatory Commission (CBRC) finedGuangfa Bank and another 21financial institutions Rmb2.07bn in total forfraudulent guarantees and non-compliant lending to troubled privatemanufacturer Cosun Group. Guangfa Bank was suspected of offloadingpotential NPLs of Cosun Group to other banks by providing off-the-tableguarantees. With such guarantees, those banks offered lending through mainlyshadow banking channels, such as trust plans. Guangfa Bank itself was finedRmb722mn, equivalent to 7% of its 2016net profit.

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