On Friday, China’s banking regulator stated, it will start monitoring the quantum of support being provided by lenders to struggling smaller firms, in what is the latest push to channel more funds into the country’s most vulnerable business sector.
For years regulators have been trying to channel more funds to small and medium sized companies in the private and public sector without much success; the coronavirus pandemic has added urgency to these efforts.
In the annual assessment by China Banking and Insurance Regulatory Commission (CBIRC), the regulator will now monitor the lending support provided to small and medium enterprises (SMEs).
Th regulator’s guidelines now requires commercial lenders to lend to SMEs at a pace no lower than the industry lending growth rate; CBIRC has also set growth targets to control the lending rates as well as bad loan ratio on SME loans based on the size of the bank.
Lenders who perform poorly in either building up teams or in the disclosing the information, the CBIRC will take steps to rectify the problem. The regulator did not elaborate on what would be its rectifying measures.
According to sources, China’s efforts to pump more than $118 billion (800 billion yuan) into companies vide cheap bank loans in order to counter the economic impact of the coronavirus have run into into headwinds, including eligibility criteria and different lending standards.
“The CBIRC has publically urged several times that SME loans be profitable but have a low margin, that means there’s still room for state-owned lenders to sacrifice margins in profit to help hitting the lending target towards SMEs,” said Sun Binbin, an analyst at TF Securities.
CBIRC’s guideline is aimed at improving the efficiency and quality of lenders’ services towards SMEs, said the regulator while adding that assessment will kick off later this year.