Regulator pushes for M&A in rural credit market

China’s banking regulator has called for more mergers between the country’s rural credit cooperatives (RCC) to reduce their high credit risks, state media reported. Jiang Liming, deputy director of the China Banking Regulatory Commission’s cooperative finance supervision department said the purpose of mergers and acquisitions in the sector is to "dissolve the risks in China’s rural credit market without closing these high-risk RCCs and reducing the supply of financial services in the rural areas." M&A targets include RCCs that have a non-performing loan (NPL) ratio higher than 30%; the industry average NPL ratio is 10%. At present, mainland banks are allowed to acquire up to a 100% stake in an RCC, while foreign financial institutions and domestic enterprises can purchase a maximum 20% stake.