Slow economic growth to put banks under pressure

Pedestrians walk past a Bank of China sign at its branch in Beijing March 26, 2013. [Photo/Agencies]

If the economy does not stabilize this year, the credit risk of some industries and companies will rise during their process of transformation.

"Although nonperforming loans and the NPL ratio are expected to rise in 2015, the overall risk can be controlled as long as China's economy does not suffer a hard landing this year and the loan-loss provisions remain at a high level, which was 247 percent as of the end of September 2014, "Wen said.

Cao Yuanzheng, chief economist at Bank of China Ltd, said that banks can handle debt risks because they had set aside more than 2.5 percent of their total lending book to cover potential bad loans.

"The average NPL ratio for banks nationwide was 1.08 percent at the end of June and we believe the probability of the ratio hitting 2.5percent is extremely low," Cao said.

Responding to the changes in macroeconomic and financial conditions, domestic banks worked harder to manage their asset quality and accelerated their resolution of bad loans.

Zhang Jinliang, executive vice-president of Bank of China Ltd, told a news conference in August that the bank had strengthened its supervision and management of key regions, areas and customers to reduce financial risks as early as possible.

Commercial banks also strengthened the collection and resolution of nonperforming assets and improved their NPA cash recoveries. They actively resolved NPAs by various means such as bulk transfers and write-offs.

In the first half of 2014, Bank of China resolved NPAs worth 27 billion yuan. The Agricultural Bank of China Ltd wrote off 6.9 billion yuan of bad debts and transferred 8.3 billion yuan of them.