China will raise tolerance for banks’ non-performing loans amid coronavirus outbreak

FILE PHOTO: Headquarters of the People’s Bank of China (PBOC), the central bank, is pictured in Beijing, China September 28, 2018. REUTERS/Jason Lee

BEIJING (Reuters) – China will increase the tolerance for non-performing loans (NPL) for local branches of financial institutions and encourage them to write off some bad loans to lower the NPL ratio, an official said on Monday.

Affected by the coronavirus outbreak, companies’ operations are deteriorating, and overall economic growth is cooling, so it is unrealistic for banks to maintain their NPL ratios, said Ye Yanfei, an official with China’s banking and insurance regulator at a briefing in Beijing.

Separately, Peng Lifeng, an official from the People’s Bank of China, told the same briefing that the epidemic has had an impact on firms’ ability to repay bonds, but overall the effect is not huge.

Reporting by Lusha Zhang and David Stanway, editing by Louise Heavens

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