China’s banks are in a deepening stand-off with regulators over the level of provisions they must make to protect against loan defaults as bad debts continue to climb. While institutions are required to maintain provisions of at least 150% of non-performing loans, the largest banks are pressing for looser rules through a mixture of public lobbying and private defiance. ICBC has flouted the rule for three consecutive quarters and an executive told the Financial Times that the bank would find it difficult to come back into compliance. “Raising loan loss provisions will affect profit growth, and [raising] profits is our biggest task right now,” said the executive. Officially, 1.8% of all Chinese loans are non-performing, although the credit rating agency Fitch puts the true figure at more than 15%.
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