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

Effects of mainland Chinas Non-performing givewords On beaching 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 in that respect were three types of NPLs, overdue, doubtful and bad. This approach underestimated NPLs as it did non include exceedingly equivocal loans that were still payinginterests and were not yet overdue. Lardy (1998) suggests other reasons wherefore the NPL enigma might be underestimated in the old Chinese system. Bank accounting and auditing practices in China have unplayful shortcomings; foreign auditing was not a common practice until really recently. apart from NPLs, banks often have substantial non-performing assets that are not reported. Finally, because the selective information on NPLs exclude interbank and trust le nding as advantageously as credit that is concealed in equipoise sheets as other items, they may underestimate significantly the chalk up serve 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 detriment (unrecoverable). Reclassification of loans utilize the international standard was completed in the quadruplet heavy(a) SOBs(State owned banks) by July 1999.

? History The non-performing loans (NPLs1) of Chinas banks, in particular state-owned banks and believe & ampere; investment companies mainly accumulated in the expiration of 19! 92-1997 during which China experienced first a high flash and and so a contraction. At the end of 1997 NPLs accounted for 35 per centum of the total outstanding loans of financial institutions as a mount-length . extraneous analysts estimate that the bad loan ratio of Chinese banks is some 50%, or twice the official estimate. ? do factors The fast accumulation of NPLs during that period... If you want to get a full essay, assemble it on our website: BestEssayCheap.com

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