Central Bank official sees sound operation in CITIC and Merchants banks

Xuan Changneng, head of the Financial Stability Bureau under the People's Bank of China, recently said in an interview that the operations of China's banking institutions are generally sound, without the exception of China CITIC Bank and China Merchants Bank whose credit ratings were downgraded by Fitch Rating Inc in February.

International credit rating agency Fitch lowered the credit ratings of CITIC and Merchants banks to D from C/D February 2, claiming that both banks' capital positions have deteriorated with increased credit risks because of a surge in loans they extended earlier.

In response, Xuan said that the operations of CITIC and Merchants banks are currently sound. Both the banks' capital adequacy ratios meet the regulatory requirements, their non-performing loan (NPL) ratios and sizes continue to drop, and their liquidity and profitability are high. Compared with their international counterparts, the capital adequacy ratios and asset quality of China's banking institutions remain at a high level.

Xuan hoped that major rating agencies including Fitch can make impartial evaluations on China's financial institutions in accordance with objective standards.

He added that similar ratings adjustments will not affect the pace for reform, opening up and development of China's financial industry. Fitch's rating adjustment on 2 Chinese banks has not had any noticeable negative impacts on the market, nor will it affect financial regulatory departments' supervision and support to the banks.

By People's Daily Online