On Friday, in a statement, China’s top banking and insurance regulator said, the sector has written off $466.6 billion (3.02 trillion yuan) in non-performing assets in 2020, up by more than 50% from a year ago.

At the end of 2020, the non-performing loan ratio of the banking sector was 1.92%, said the Banking and Insurance Regulatory Commission (CBIRC) in a statement. It went on to add, the whole sector set aside a 1.9 trillion yuan loan loss provision last year to increase the buffer against risks.

“Banks are still facing severe bad loan pressures in future and there’s a possibility to see the sour debt rise further,” said Xiao Yuanqi, chief risk officer at the CBIRC during a news conference in Beijing.

CBIRC had conducted stress tests and prepared contingency plans for rising non-performing loans.

“Currently, the risk level of single banking institutions, regional banking sectors, or the whole financial system, are all under control,” said Xiao.

In terms of regional financial stress, Xiao urged mid-sized and smaller banks to “resist the temptation of blind expansion” and stick to home markets.

In 2020, Chinese commercial banks posted 2 trillion yuan in net profits in 2020, down by 1.8% from a year earlier, said the CBIRC, after data showed a rare fall in annual profits for the sector following the coronavirus pandemic which has weakened it even further.

($1 = 6.4722 Chinese yuan renminbi)

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