The result of stress tests show that Chinese banks can sustain the worst scenario of a 50 percent drop in housing prices

The result of stress tests show that Chinese banks can sustain the worst scenario of a 50 percent drop in housing prices, the official CCTV reported Friday, citing Liu Mingkang, Chairman of the China Banking Regulatory Commission (CBRC).

“In a worst scenario, the prices in the real estate sector would decline by 50 or 30 percent, which, (the Chinese banks with) current bad loan ratios are able to sustain,” Liu said, “There is no chance of saying that the banking industry is held hostage by property developers.”

As of the end of last year, the average capital adequacy ratio of China’s commercial banks stood at 12.2 percent, Liu was quoted as saying, which is lifting the banks’ capability to guard against risks.

The result of banks’ stress tests on possible declines in property prices would not represent the CBRC’s judgment of the real estate sector’s moving potential, but it could boost banks’ confidence to implement the government’s policies to control the industry, Liu added.

 

Source:caijing