China banks to help snowstorm victims

Chinese banks should offer adequate credit only to sound companies and farming operations that were affected by recent freak snowstorms, the top banking watchdog said on Friday.

Liu Mingkang, head of the China Banking Regulatory Commission (CBRC), said one of the most important tasks for banks in the wake of the snowstorms that killed over 100 people and caused at least $15 billion (Dh55bn) in damage should be to ensure that power and grid companies get the credit they need to restore power.

Banks should also be sure to offer credit to well-run businesses to help them return to normal operations, Liu said in a statement on the agency's Website. But they should not hand out money to poorly managed firms just because they have suffered from the damaging storms, he said.

"Banks should consider the need for reconstruction, but also need to be aware of risks and avoid indiscriminate lending," Liu said after visiting central Hunan, one of the provinces most badly hit by the storms.

"They should offer timely loans to good firms to help them resume production as soon as possible, but should take the opportunity to change their stance towards unsound ones, by limiting and even disposing of risks related to them."

Liu added that banks should not lower individual clients' credit ratings as a result of the storms, nor should they increase their interest rates in the case of any temporary late payments.

The agency's call largely echoes one made by the central bank in late January, but it lays out more explicitly that banks should still be discriminating about whom they lend to.