MNI BRIEF: PBOC To Support SMEs, Reduce Credit Risks - FSR

The People's Bank of China will keep its prudent monetary policy flexible and precise, and vigorously supports small businesses, rural revitalization, manufacturing, technological innovation, and green transformation, the central bank said in its China Financial Stability Report published on its website Friday. The PBOC will promote reforming small and medium-sized financial institutions to prevent risk, focus on reducing credit risks, and maintain the smooth operation of the stock, bond, and foreign exchange markets, as well as prevent impact from external risks, the report said.

In the banking industry stress test conducted by the central bank, it pointed out that risks in SMEs, personal business loans, local government debt and real estate loans are worthy of attention. If the non-performing ratio of local government debt-related assets rises by 15 percentage points, the overall capital adequacy ratio of 4015 participating banks will drop by 2.12 pps to 12.27%.

Among which, 3985 small and medium-sized banks participated show weakness to possible deterioration of credit assets. If the NPL ratio rises by 100%, the overall capital adequacy ratio will drop to 10.53%, with about 27% of them failing the test, according to the report.