China’s financial regulators are stepping up penalties on banks and asset managers caught hiding bad debts as Beijing grows increasingly wary of the country’s opaque cache of unpaid loans.
The strengthened enforcement underlines authorities’ rising concerns over a potential runaway bad debt problem at smaller banks in the country, a trend that China’s top leaders fear could spawn financial and social instability.
Fines for banks and asset managers that help mask the bad debt are on the rise, with at least five large institutions, including a branch of the Industrial and Commercial Bank of China, receiving penalties over the past month. While the amounts are relatively small, the penalties are intended to deter other institutions from doing the same, analysts said.