It’s symbolic of the oddness of Chinese banking that we could see a 14% increase in non-performing loans this year without asset quality actually having deteriorated at all.
How? Loan recognition standards.
It is common practice worldwide that any loan more than 90 days overdue is impaired. This also used to be the case in China until 2011, when a curious category called “overdue but not impaired” came into being, describing loans that are more than 90 days overdue and yet not recognized as non-performing loans.
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Jason Bedford, UBS |
This is, as UBS analyst Jason Bedford notes: “An oxymoron, since the key indicator for any bank that a loan is bad is when someone stops paying you back.
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