BEIJING (Reuters) - China's banking regulator said on Friday it will start monitoring how much support lenders are extending to struggling smaller firms, the latest push to guide more funding into the country's most vulnerable business sector.
Regulators have been trying for years to direct more financing to smaller and private companies at affordable rates, and the severe economic blow from the coronavirus outbreak has added urgency to the efforts.
Banks' lending to small and medium enterprises (SMEs) will be included in an annual assessment to be overseen by the China Banking and Insurance Regulatory Commission (CBIRC), according to a draft guideline released by the regulator.
The guideline requires commercial lenders to lend to SMEs at a pace no lower than the industry lending growth rate, and specified different targets to control the lending rates and bad loan ratio on SME loans based on the size of the bank.
For lenders who fall short of financing SMEs, perform poorly in building up teams or disclosing information in serving smaller firms, the regulator will tighten supervision or carry out reforms to rectify the problem, the CBIRC said. It didn't elaborate what actions it will take.
Beijing's efforts to pump more than 800 billion yuan ($118 billion) into companies via cheap bank loans to counter the economic impact of the virus outbreak have run into some difficulties, sources told Reuters. These issues include confusing eligibility criteria and different lending standards.
"The CBIRC has publically urged several times that SME loans be profitable but have a low margin, that means there's still room for state-owned lenders to sacrifice margins in profit to help hitting the lending target towards SMEs," said Sun Binbin, analyst at TF Securities.
The guideline aims at improving the efficiency and quality of lenders' services towards SMEs, the CBIRC said, and the assessment will kick off this year, it added.
(Reporting by Cheng Leng and Se Young Lee; Editing Jacqueline Wong)
