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Stress test of 1550 banks: 21 banks failed the test under extreme shock
2020-11-06 19:59:27 Reporter: Cheng Weimiao Editor: Li Weijia
Beijing News Shell Finance News (Reporter Cheng Weimiao) On November 6, the central bank released the "China Financial Stability Report (2020)", which gave the test results of 1,550 banks in the banking industry stress test topic. The report shows that the individual risk resistance capabilities of participating banks are different. Under mild, moderate, and extreme shocks, 10, 13 and 21 banks respectively failed the test at the end of 2020.
After two years of profit retention and replenishment of capital, the number of bankers who failed the test under mild and moderate shocks will drop to 4 and 8 respectively at the end of 2022. Under extreme shocks, banks that fail the test will not be able to meet capital by relying on profit retention alone. Regulatory requirements for adequacy ratios. If the 2.5% reserve capital requirement is not taken into account, under mild, moderate and extreme shocks, the number of bankers who fail the test at the end of 2020 will drop to 2, 5 and 15 respectively.
Credit risk is the main factor affecting the capital adequacy level of participating banks. Under mild, moderate, and extreme stress scenarios, the loan quality of participating banks will deteriorate and the non-performing loan ratio will rise sharply. Without considering the disposal of non-performing loans, under mild shocks, the non-performing loan ratio will rise to 4.90%, 5.49%, and 6.73% at the end of 2020, 2021, and 2022; under extreme shocks, the non-performing loan ratio will rise to 10.65% at the end of the next three years , 12.45%, 13.36%. Banks need to increase loan loss provisions, and the level of capital adequacy will be greatly affected.
In terms of sensitivity stress testing, the epidemic has a greater impact on some industries and has a negative impact on the capital adequacy level of participating banks. The report shows that if 50% of the normal loans of small and micro enterprises in the wholesale and retail industries, accommodation and catering industries, culture, sports, and entertainment industries become non-performing loans, the overall non-performing loan ratio of the 1,550 participating banks will rise to 4.44%, with sufficient capital. The rate dropped from 14.73% to 13.08%. If 50% of the normal loans of import and export enterprises become non-performing loans, the overall non-performing loan ratio of the participating banks will rise to 6.46%, and the capital adequacy ratio will drop to 11.51%. If the non-performing loan ratio of all small, medium and micro enterprises rises by 400%, the overall non-performing loan ratio of the participating banks rises to 5.28%, and the capital adequacy ratio drops to 12.44%, a drop of 2.29 percentage points.
Risks in areas such as customer concentration, off-balance sheet business, local government debt, and real estate loans are worthy of attention. Among them, if the NPL ratio of local government debt-related assets rises by 15 percentage points, the overall capital adequacy ratio of the participating banks will drop to 12.45%, a drop of 2.28 percentage points. If the NPL ratio of real estate development loans increases by 15 percentage points and the NPL ratio for house purchases increases by 10 percentage points, the overall capital adequacy ratio of participating banks will drop to 12.7%, a drop of 2.03 percentage points.
According to the report, there are 1,550 participating banks, accounting for 78% of the total assets of banking financial institutions, including 6 large commercial banks, 12 joint-stock commercial banks, 98 city commercial banks, 534 rural commercial banks, and 268 rural commercial banks. Credit agencies, 8 rural cooperative banks, 573 rural banks, 12 private banks and 39 foreign-funded corporate banks.
