China’s biggest banks tripled the amount of bad loans written off in the first half of the year, cleaning up their books ahead of what may be a fresh wave of default.
The five biggest lenders have sought to curb credit risks. By the end of June, they had set aside an average 272% of the value of their soured debt as provisions, surpassing the regulator’s 150% requirement.
A separate threshold that calls for their loan-loss reserves to exceed 2.5% of total credit may become a tougher goal following the debt write-offs — which also reduce provision levels — and force the banks to set aside more funds
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The news has been out for a while but took a little while to filter through, fuelling the rumour mill and exacerbated by stop loss selling as markets have been caught on the wrong side.