China extends policy allowing banks to sell bad personal loans
Chinese banks are accelerating write-offs and transfers of bad assets to shore up asset quality as margins have hit record lows
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CHINA’S top financial regulator extended a policy allowing banks and asset management firms to dispose of bad personal loans amid rising credit card defaults, according to sources familiar with the matter.
The National Financial Regulatory Administration (NFRA) last week issued guidance to banks and assets management companies to allow them to transfer and sell soured personal loans and bad single-client corporate loans beyond the original end of 2025 deadline, said the sources, asking not to be identified as the matter is private.
The extension underscores the determination from regulators to provide banks with more flexibility in managing deteriorating asset quality amid economic headwinds. The policy was originally introduced in early 2021.
The NFRA did not immediately reply to a request for comment.
Chinese banks are accelerating write-offs and transfers of bad assets to shore up asset quality as margins have hit record lows.
Transfers of personal bad loans reached 37 billion yuan (S$6.8 billion) in the first quarter last year, up more than eight-fold from the same period in 2024. Among these, the transfer of bad credit card loans was 5.19 billion yuan, Securities Daily reported, citing data from the official credit assets transfer centre. The centre has suspended the disclosure of the data.
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Lenders disposed of a record 3.8 trillion yuan of non-performing assets in 2024, up from about three trillion yuan a year since 2020, according to NFRA data.
The regulatory support coincides with a historic boom in issuance of non-performing loan (NPL) asset-backed securities, as Chinese banks tap the market to offload bad assets. Such bond sales jumped 61 per cent to a record 82 billion yuan last year, according to data from CN-ABS.com, which tracks the market.
Chinese commercial banks reported a combined profit of 1.87 trillion yuan in the third quarter of 2025, slightly down from the same period a year earlier, while NPLs remained at a record 3.5 trillion yuan. BLOOMBERG
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