Moody's: Tightening regulations for China's policy banks to mitigate contingent liabilities

Moody's Investors Services, in its latest report on China’s three policy banks, with the key highlights, found below.

“New regulations proclaimed by China's (A1 stable) Banking Regulatory Commission (CBRC) for the country's three policy banks will -- if effective -- be credit positive for the sovereign.

Specifically, Moody's considers that, if effectively implemented, the measures will help mitigate the potential contingent liabilities associated with the banks' lending to social projects with low economic returns and in higher-risk countries, particularly under China's Belt and Road Initiative (BRI).

According to the new regulations released in mid-November, the policy banks will need to strengthen capital management, corporate governance, and risk controls.

These regulations are also in line with the policy direction highlighted in the National Financial Work Conference and the 19th Party Congress, in which policymakers emphasized the need to limit financial risks across the economy.”