Fitch Warns China Government of Financial Crisis

Fitch Warns China Government of Financial Crisis
Submitted by Parminder Singh on 2010, June 24 - 17:13 EconomyFeaturedTNMChina
Fitch ratings has affirmed the National Bank of Egypt's with a stable outlook by upgrading the bank’s individual rating to ‘D’ from ‘D/E’.

China is again heading towards the financial crisis as Fitch Ratings indicate. Increasing loans and the repackaging and selling of debt by its banks had taken the credit risk to higher levels.

Charlene Chu, Fitch’s Senior Director of Financial Institutions for China, said “Credit is disappearing from bank balance sheets, resulting in a pervasive understatement of credit growth and credit exposure”.

Last year, China’s Government had lent 9.59 trillion Yuan ($1.4 trillion) thus, accelerating the economy when whole of the world’ economy was suffering from crisis.

The credit products of Lehman Brothers Holdings Inc. also called as Minibonds have been sold by banks in Hong Kong and Singapore.

Many of the individual investors had lost money on the notes.

Refusal of Chinese banks to unveil the loan information clearly indicates the depth of the problems.

Chinese banks have recorded the average recovery rate of 34% on corporate non-performing loans, while 72% of the loans are backed by collateral, guarantees or pledged assets.

By end of December 2009, NBE's capital adequacy ratio has significantly improved to 12.6%, where as bank's equity/assets ratio remained low at 3.4%.