Big Four enhance risk management to promote asset quality

China's four largest State-owned commercial banks by assets said they are confident of maintaining stable asset quality this year, thanks to an upward trend in the nation's economy and their enhanced risk management capabilities.

Despite facing internal and external challenges, China's economy has strong resilience, huge potential, high vitality and a long-term positive outlook. As the effects of various economic and financial policies continue to emerge, economic recovery is accelerating, providing a favorable environment for the improvement of bank asset quality, said Wang Jingwu, senior executive vice-president of Industrial and Commercial Bank of China.

"ICBC has maintained steady operations, with a good foundation of asset quality, strong risk-offset ability and relatively large space for buffering. In 2022, indicators reflecting asset quality trends of the bank continuously improved," Wang said.

The quality control of real estate loans is among the key areas of risk management for ICBC. Although the bank's nonperforming loan ratio in the real estate sector rose slightly last year due to market adjustments, the proportion of its real estate loans to total loans is relatively small and the risk is generally controllable, he said.

"We have adopted cautious standards for recognizing nonperforming loans. Our real estate NPL situation has been fully and truly reflected, and sufficient provisions have been made for loans at risk. With the accelerated economic recovery and the implementation of policies supporting the healthy development of the real estate market, we expect that gradually, risks in this sector will be effectively resolved," Wang said.

In 2023, China Construction Bank will focus on strengthening customer selection and credit concentration risk management to ensure the quality of new loans, said Zhang Jinliang, president of the bank.

"In particular, we need to include all business of our parent company and domestic and foreign subsidiaries that bear substantial risks in unified credit management, implement unified risk preferences and standards, and prevent implicit concentration risks and cross-contagion risks brought by clients through various products or complex transaction structures," Zhang said.

CCB will leverage its advantages in financial technology to strengthen the construction of risk warning systems and identify risks early. The bank will actively support the revitalization of NPLs for promising enterprises while ramping up the disposal and write-off of NPLs, he said.

At the end of last year, the NPL ratio of CCB and ICBC both dropped by 0.04 percentage point from the previous year-end to 1.38 percent.

Looking ahead to 2023, Liu Jiandong, chief risk officer at Bank of China, said: "We believe that the overall trend of China's economic recovery will be maintained, with fiscal policy being strengthened, monetary policy being further targeted and consumer demand being boosted … During the process, however, we must recognize the complexity of economic operations and remain vigilant against uncertain and unpredictable risk factors."

Currently, the real estate sector is in the process of recovery. Due to the particular nature of housing projects, it will take a relatively long time to resolve real estate risks, which will continue to affect bank asset quality for a while, Liu said.

In addition, the complexity of the overseas situation, particularly the impact of the recent risk management failures of some European and US banks on the global financial market, also calls for BOC's high attention, he said.

"In 2023, we will continue to put greater emphasis on actively preventing and resolving systemic financial risks … strengthening institutional construction and enhancing supervision of risks in key areas and regions," he said.

Agricultural Bank of China will continue to optimize its credit structure and strengthen unified and integrated risk management at the group level, said Zhang Xuguang, executive vice-president of the bank.

At the same time, ABC will improve the proactive credit risk prevention and control mechanism, increase risk inspections in key areas and continuously conduct stress tests. In addition, the bank will further improve its digital financial risk management capabilities and strengthen the role of big data in risk prevention and control, he said.