Another Financial Warning Sign Is Flashing in China

  • Broad loan-to-deposit ratio at 80% for top 50 China banks: S&P
  • China’s credit reliance could worsen NPL problem, Fitch says

Add another credit indicator to the financial warning signs flashing in China.

The adjusted loan-to-deposit ratio, which includes a range of off-balance sheet items and is an indicator of the banking system’s ability to weather stress, climbed to 80 percent as of June 30, according to S&P Global Ratings. For some smaller lenders, the ratio has already topped 100 percent, S&P estimates.

S&P’s adjusted measure is rising much faster than the official loan-to-deposit ratio as banks pile into off-balance sheet lending, sidestepping government efforts to rein in credit. At the current pace, overall credit could surpass deposits on an adjusted basis within a few years — a level that would give China little leeway to stave off financial turmoil, S&P says…

Another Financial Warning Sign Is Flashing in China

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