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China regulator holding stress tests

The China Banking Regulatory Commission (CBRC) said it will conduct regional and national stress tests after banks saw a spike in bad loans last year. The regulator has said all its offices and supervisory departments must organize stress tests of banking institutional organizations in a timely manner so as to analyze the impact of unfavorable situations in individual banks and the banking system and urge banking financial institutions to make emergency plans. Chinese banks’ non-performing loan (NPL) ratio rose to its highest level in two years in the last three months of 2013, to 1%. A corporate bond default and the near-collapse of two high-profile shadow-banking investment products earlier this year were further evidence of growing financial strains afflicting the economy. Chinese banks are now dealing with the aftermath of the huge lending binge that policymakers unleashed to soften the impact of the global financial crisis in 2008.

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