The Banking and Strategy Initiative

Chillin' out till it needs to be funded

China’s banks get ‘lean’ | A new crisis

Here’s exactly what’s up at these Chinese banks

Huffington Post broke us this one, Thanks James, Adrinana! Huff!

Of course China’s government brought it upon themselves by asking them to lend , when $1.4 trillion in new loans were made in 6 months without solving the earlier ‘NPA raising’ habit at chinese state institutions. China is also raising interest rates right now and clamped down on new Credit at carefully targeted institutions. In fact, its largest bank ICBC and 7th largest in loans China Citic have been selectively told to put in an additional 0.5% in reserves. However, the state media has corrected earlier assertions (CCTV):

Top lenders ICBC and the Bank of China say instructions are for prudence and balance in lending, not a complete standstill. The watchdog has confirmed this, saying its pace not volume that needs careful management.
Top executives at China’s two big state banks, Bank of China and the Industrial and Commercial Bank of China, or ICBC, have told CCTV they were never told to stop lending for the rest of the month.

Add someone in Hongkong who writes a default swap for them ( insurance, in case of default, maybe the local Nankiang units can diversify 🙂 ) and you have another perfect crisis, for the Chinese to fund this time. And they’ve defaulted on quite a few contracts themselves! ( commodities, October 2009)

The China Bank Regulatory Commission, CBRC, Chairman Liu Mingkang is currently walking a tightrope. The banking regulator has set 2010’s annual target at 7.5 trillion yuan. ( a 22% decrease from 2009). January’s ramp up has been uniquely quick and hence the ‘crackdown’

Citi taught us to use Off Balance sheet financing

Banks are moving loans off their balance sheets in order to dress up their accounts for worried regulators.Only this time it isnt Citigroup C or State Street SST thats involved, but Chinas big banks.In November Chinas banks packaged and then sold $18.6 billion in loans to Chinese trust companies, removing those loans from the banks balance sheets, Shanghai Benefit Investment Consulting has told the Wall Street Journal. Thats a huge 54% of all the new loans banks made in the month according to government figures. For the year the total of loans packaged and sold by banks comes to almost $90 billion.The repackaging and sales come as Beijings bank regulators have started to worry that the countrys banks dont have enough capital to back all the loans theyve made in 2009.

So far in 2009 Chinas banks have made more than $1 trillion in new loans, according to government figures. Regulators have begun to press banks to raise more capital to buttress their balance sheets.By selling the loans to trust companies, banks take them off their balance sheets. That has the effect of reducing the amount of loans that the banks look like they have made.

That in turn reduces the amount of capital it looks like they need to raise to support these loans via James Jubak: Chinas Banks Copy Citigroup in Hiding Bad Loans Off Their Balance Sheets.(last month)


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