Banking watchdog to chop provision coverage
Lowering requirement will be conducive to speeding up disposal of bad loans and give banks more capital to work with
China’s banking regulator plans to cut the provision coverage ratio for commercial banks to 120%-150% from the previous 150%, The Paper reported.
It is also called NPL Provision coverage ratio, which calculates the amount of funds that banks are ordered to set aside to cover their non-performing loans.
Wang Zhao, deputy chairman of China Banking Regulatory Commission, said the current provision coverage level in the industry is over 180%, far beyond the international level.
Thus, lowering the requirement will be conducive to speeding up the disposal of bad loans, and give banks more capital to work with to support the real economy, Wang said.
Meanwhile, the loan loss reserve, an indicator of how protected a bank is against future losses, will fall into a range of 1.5%-2.5% from the previous 2.5%.