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Chinese banks get serious about risk of bad debts

Published on Aug 8, 2014 5:21 AM
People waiting outside a Bank of China branch in Beijing on July 11, 2014. Bankers from major listed lenders such as Bank of China say they are further cutting lending to riskier borrowers, in particular smaller private companies. -- PHOTO: AFP

SHANGHAI (REUTERS) - Chinese banks are scrambling to get on top of bad debts they have downplayed for years, cutting off riskier borrowers, further tightening lending terms and, in one case, deploying teams of investigators to assess the risk of loan defaults.

China's banks keep reporting bad loan levels well below what most analysts consider realistic, but their recent actions suggest the slowing economy may be squeezing borrowers and lenders harder than thought only a few months ago.

China's fifth-largest lender, Bank of Communications (BoCom), assembled research teams last month to look over the assets of troubled borrowers in Zhejiang province, according to bank sources and an internal document. The province is a hotbed of China's credit stress.

BoCom denied that special teams had been set up or that there was any surge in potential bad loans in an email to Reuters. The bank said it had always placed great importance in its risk control efforts.

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