Last Friday, there were unconfirmed reports on the news wires that E&Y was pressured by the People's Bank of China to withdraw the report. Ernst & Young is the auditor of Industrial & Commerce Bank of China--the largest Chinese bank by assets--in its upcoming IPO. Other research by McKinsey & Co. and PricewaterhouseCoopers has painted a similar picture of China's defaulting loans figures.
The global market is familiar with defaulting loans, beginning with the US Savings and Loans Industry crisis during the 1980s. Since then, non-performing loans have shaken stock markets and real estate industries in Korea and Thailand during the Asian financial crisis, in Germany and in India.
However, information concerning non-performing loans in China is scarce. Many loans were approved by political influence, made to officials of the Chinese Communist Party and to state-owned companies, often requiring no credit checks.
According to the Ernst & Young report, "Obtaining accurate information about NPLs in the loan portfolios of Chinese banks is difficult, because of a banking culture that resists openness and accountability, a decentralized operating environment, and regulations that limit banks' ability to resolve the loans."
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more inforrmation visit Asset & Logo Licensing.
