Effects of China's Non-performing Loans On Banking Financial Statement and Financial Statistics

Effects of mainland Chinas Non-performing loanwords On briming Financial Statement and Financial Statistics 1.0 Overview of NPL in China ? NPL definition As a issuance of fact, in that respect were no so-called NPLs in the minds of Chinese bankers until 1996. The bring Rule, formulated by the Peoples Bank of China in 1996, stipulated that there were three types of NPLs, overdue, doubtful and bad. This approach underestimated NPLs as it did non include exceedingly dangerous loans that were still payinginterests and were not yet overdue. Lardy (1998) suggests other reasons wherefore the NPL fuss might be underestimated in the old Chinese system. Bank accounting and auditing practices in China have unplayful shortcomings; remote auditing was not a common practice until really recently. apart(predicate) from NPLs, banks often have substantial non-performing assets that are not reported. Finally, because the entropy on NPLs exclude interbank and trust lending as salubr ious as credit that is concealed in equipoise sheets as other items, they may underestimate significantly the chalk up fill in of non-performing assets. In 1998, China adopted the international standard loan potpourri scheme that consists of five categories: normal (pass), special mention, substandard, doubtful, and handout (unrecoverable). Reclassification of loans utilize the international standard was completed in the four heavy(a) SOBs(State owned banks) by July 1999.

? History The non-performing loans (NPLs1) of Chinas banks, in particular state-owned banks and depart & ampere; investment companies mainly accumulated in the level of 1992-1997 during which China experienced first a high largeness and and so a contr! action. At the end of 1997 NPLs accounted for 35 share of the total outstanding loans of financial institutions as a exclusively . extraneous analysts estimate that the bad loan ratio of Chinese banks is some 50%, or twice the official estimate. ? causing factors The fast accumulation of NPLs during that period... If you want to get a spacious essay, assemble it on our website: OrderEssay.net

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