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China's large banks wary of bad loans swap plan

Lack of clarity on how government will convert to equity up to 1.27 trillion yuan of bad debt owed to banks mostly by SOEs and on level of support that state will provide

Shanghai

CHINA'S proposal to deal with a potential bad-loan crisis by having banks convert their soured debt into equity is meeting with unexpected resistance from some of the biggest potential beneficiaries of the plan: the country's large banks.

Asked about the plan at the Boao Forum last week, China Construction Bank chairman Wang Hong-zhang said he needed to think of his shareholders and wouldn't want to see a plan that simply converted "bad debt into bad equity". China Citic Bank's vice-president Sun Deshun said at a press conference last week that any compulsory conversion of debt into equity would have to be capped. And Bank of China chairman Tian Guoli said it's "hard to evaluate" how effective...

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