Anti-corruption forces China's banks to review big client credibility

Want China Times, Staff Reporter 2014-09-21

Two workers changing advertisements for a bank in Fuzhou, Fujian. (Photo/CNS)

Many banks based in the populated central and western parts of China have started evaluating the credibility of their big clients — mostly enterprise owners and top executives — especially since authorities began cracking down on corruption offenses nationwide, the China Business News said, citing sources familiar with the matter.

Once listed as high-risk clients, their credit and ability to acquire a loan is limited, said the report.

According to the newspaper, an investigation into the credit risk of big clients since July has been one of the major tasks bank managers in central and western China are carrying out and has not concluded yet.

Such credit reviews began in July, when the key operator of a large private enterprise was arrested for an investigation into corruption allegations, which also involved several government officials.

Such incidents have often caught banks by surprise because of the potential risks of maintaining business relations with enterprises facing corruption investigations. As a result, banks have begun reviewing their major clients' credibility.

The review drive focuses on the targeted enterprise's corporate structure, investments, production and business operations, and financial conditions, a bank source told the China Business News.

The review results are used as a reference by banks to re-assess the value of the guarantee the enterprise provided while applying for a loan, the source explained.

"More and more enterprise owners are facing corruption probes. This will definitely affect bank loans," the source said, warning that possible bad loans could threaten the survival of small-sized banks.

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