Capital levels at some Chinese banks risk falling below a crucial threshold meant to buffer them against financial contagion, as lenders face an incoming surge of bad debts due to coronavirus.
Beijing has called on banks to play a key role in supporting companies that are struggling to survive following the Covid-19 outbreak. Regulators have instructed lenders to brace for much higher levels of non-performing loans as the economy slowly recovers following the public health crisis, which temporarily shut down swaths of industry and supply chains.
But many Chinese banks are already struggling with asset quality problems, and lack the capital and profitability for the new lending needed to fuel a recovery.
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