The People’s Bank of China is preparing to allow commercial banks to swap non-performing loans to companies for equity stakes in those firms, Reuters reported, citing two unnamed sources. “Such a rule change shows banks’ bad loans have risen to such a level that this issue has to be tackled now before it’s too late,” said Wu Kan, head of equity trading at investment firm Shanshan Finance. The sources said the new regulations would receive special approval from the State Council, avoiding the need to revise China’s commercial bank law, which forbids banks from investing in non-financial institutions.
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