The China Banking Regulatory Commission (CBRC) has warned Chinese banks to conduct thorough due diligence when issuing loans to foreign entities, Reuters reported. Poor economic situations, political and social unrest, and a weakening currency could all lead foreign borrowers to default on debts, the regulator warned. Depending on the level of risk, China’s banks must set aside provisions of between 0.5% and 50% for foreign loans, and the regulator said banks must ensure borrowers have sufficient levels of foreign currency assets before issuing loans. "The outbreak of the global financial crisis further underscores the need and importance of strengthening risk management in different foreign countries," the CBRC said.
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