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China eased write off rules for banks

January 24, 2014

China eased rules for banks to write off bad loans in an attempt to have a stronger competition in interest rate liberalization. Starting January, Chinese banks are going to benefit from greater autonomy in writing off specific small loans that negatively affected lenders` balance sheets. Lenders in China used to obtain regulatory permission before writing off these loans, but now they will be able to unload bad assets and get ready for the competition in the Chinese banking sector. Nevertheless, the new rules approved by the Ministry of Finance requires banks to prove to regulators that they attempted by all means to recover the loan, but they are now given greater autonomy to write off private business loans of less than 5 million yuan ( $826 thousand ) after trials to recover the money for at least one year. The bad loan ratio of Chinese banks recorded 0.97% in the end of the third quarter of 2013 from 0.9% in the same quarter 2012.

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Source: Financial Markets

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