Growth of bad loans in Shanghai slows

The growth of bad loans in Shanghai is slowing as the city started economic transitions earlier than other parts of the country and policies on the establishment of free trade zones and building Shanghai into an international financial center are taking increasingly stronger effects, an official said on Thursday.

Liao Min, director-general of the Shanghai Office of the China Banking Regulatory Commission said that as of the end of 2015, the outstanding nonperforming loans of the banking sector in Shanghai increased by 5.3 billion yuan ($805.6 million) from a year earlier to 48 billion yuan. The NPL ratio rose only 2 basis points to 0.91 percent during the same period, much lower than the national average of 1.59 percent at the end of September.

The outstanding special-mention loans, potentially weak loans presenting an unwarranted credit risk, and their NPL ratio both dropped in Shanghai.

The city has significantly defused the risk in lending to the iron and steel industry. Its commercial lenders cut outstanding loans to this sector sharply from 220 billion yuan at the end of 2011 to 29.6 billion yuan of loans graded as "Pass" at the end of 2015. Meanwhile, they restructured and recovered credit assets worth 140 billion yuan.

Liao highlighted the importance of the banking regulator's role in real-time monitoring, previews, anticipation and risk warning to the prevention and mitigation of financial risks.

Today, commercial banks in Shanghai are in the process of business transformation and innovation. The CBRC Shanghai Office issued guidelines for the city's banking sector to support science and technology innovations in August.

By the end of last year, outstanding loans offered by nine banks in Shanghai to 105 micro and small technology companies reached 1.02 billion yuan through the banks' cooperation with private equity firms that made equity investments in these companies.

"The CBRC will launch a trial program on the union of investment and loan in certain regions this year. Shanghai is applying for the regulator's approval to participate in the program and will guide commercial lenders to make explorations of the city's free trade zone first," Liao said.

The CBRC Shanghai Office will also support qualified banking institutions to make trial reforms on the establishment and management of subsidiary companies with licenses in the fields of credit card services, wealth management, lending to micro and small companies, as well as investment and loan union for tech companies.