Chinese banks face growing risks on bad loans, realty mess: S&P

The US-based ratings firm revised its assessment of the economic risks facing China's banking industry to 'negative' from 'stable'.

Standard & Poor's Ratings Services said on Monday that China's banks face growing risk linked to rising bad loans and problems in its real-estate sector.

The US-based ratings firm revised its assessment of the economic risks facing China's banking industry to 'negative' from 'stable'.

"We view economic risks for China's banking industry as high," S&P said in a report.

"Big lending by banks and the country's informal shadow-banking system between 2009 and 2013 "has led to high risks of economic imbalances and elevated credit risks in the economy," it said.

Although Chinese banks have a strong customer deposit base, and credit growth in the country has slowed, state ownership of major Chinese banks leads to market distortions and the system lacks transparency, S&P said.

Qiang Liao, an S&P senior director and author of the report, said that the ratings agency sees a one-in-three chance that private-sector credit could exceed 150% of GDP by the end of 2016, up from ~141% now.