Chinese banks dispute S&P ratings cut

Chinese banks came to their own defense after becoming collateral damage in last week’s Standard & Poor’s Global Ratings downgrade of the country’s sovereign debt. After cutting the credit ratings on China by one notch to A+ on concern of rising economic and financial risks after years of credit-fueled growth, S&P moved to lower its ratings on Chinese lenders. While the follow-on downgrades were in line with the industry practice, the cut will effectively increase the lending costs for those lenders, Caixin reports. The China Banking Association called S&P’s decision unfair and said the ratings agency “can’t see the forest for the trees.” It also said S&P overlooked China’s recent improvement of loan quality and the government’s resolve to cut excess leverages. The outstanding value of bad loans in the banking system stood at 1.64 trillion yuan ($247.3 billion) as of the end of June, and the ratio of nonperforming loans to total debts at 1.74%.