A surge in bad loans would put pressure on Chinese lenders’ capital, Bloomberg reported, citing the results of a stress test conducted by the central bank. The average capital adequacy ratio of the 17 banks, which account for 61% of China’s banking assets, may fall to 10.5% from the end-2013 level of 11.98% should non-performing loans increase 400% in the worst-case scenario, the People’s Bank of China said in its annual financial stability report on Tuesday. China introduced stricter capital requirements for banks in January 2013, posing a challenge for an industry facing slower loan growth and rising bad debts amid more competition and interest-rate deregulation.
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