China’s financial regulator said that it will step up efforts to restructure the country’s banking system and root out unfit shareholders, as smaller lenders struggle in the aftermath of the coronavirus outbreak, reported the Financial Times.
The announcement on Wednesday came just days after one bank revealed plans to recapitalize in a state-brokered bailout after its shares collapsed. China’s small and medium-sized banks have struggled with high levels of bad debt for years. But the economic shock from the spread of Covid-19 could worsen credit quality problems as borrowers fail to pay back loans.
“The impact on small and medium-sized banks from the current outbreak situation has been obvious,” China Banking and Insurance Regulatory Commission vice-chairman Cao Yu said on Wednesday. “As you may see again and again this year, the reform and restructuring of small and medium-sized banks will be more vigorous.”
Some of the reforms announced on Wednesday seek to address longstanding problems with smaller banks. In recent years, many have accrued high levels of bad debt after lending heavily to individuals or groups with existing ties to shareholders. The regulator said it would focus on vetting bank shareholders and identifying those that did not meet regulatory requirements.