Moody's: Chinese banks face increasing risks in asset quality

The US-based ratings agency, Moody’s Investor Service, warned over increasing risks faced by the Chinese banks in its latest report published on Tuesday.

Key Quotes:

“The Chinese banks are facing increasing risks as a result of China's economic slowdown, rising leverage in the system, and financial sector interconnectedness”

"The system is seeing an increasing level of nonperforming loans (NPLs) -- which were 1.76% of gross loans at end-September 2016, up from 1.67% at end-2015 and 1.25% at end-2014 -- while credit costs are also rising"

"The deterioration in the banks' asset quality is taking place against the backdrop of a deceleration of GDP growth and rising financial leverage. The liabilities of state-owned enterprises (SOEs) increased and reached nearly 120% of gross domestic product (GDP) at end-September 2016" 

"Furthermore, another source of risk is the rising level of interconnectedness that is occurring between the formal banking system and the shadow banking system, which has doubled in size these last 5 years with its assets equal to 82% of GDP at the end of June 2016"