Several local banking industry regulators instructed banks to loosen standards for recognizing companies’ nonperforming loans in a bid to offset damage to businesses and the economy from the coronavirus epidemic, reported Caixin.
Local branches of the China Banking and Insurance Regulatory Commission (CBIRC) in Shanghai, Zhejiang and Jiangsu issued notices over the weekend asking local banks to be more tolerant on bad loans and reduce their profit targets. Two-thirds of small businesses said they’d go broke in one to two months, a survey found.
The Shanghai banking regulator told banks to work out policies for a certain lenient period and exempt borrowers from punitive interest or negative credit records during the period.
Business across the country has been disrupted by measures to contain the deadly disease, such as extended holidays and restrictions on transport. “This is an extraordinary move in extraordinary times,” said Zeng Gang, deputy director of the National Institution for Finance & Development. As the health crisis unfolds, many companies face difficulties resuming normal operations. Unconventional policy tools like this will help businesses and banks to offset the impacts, Zeng said, though they offer only a temporary solution.