BEIJING (Reuters) - China's banking regulator asked joint-stock lenders to control exposure to industries suffering overcapacity by using thorough risk assessments and collateral valuations, said two people with direct knowledge on Friday.
In a notice recently circulated to joint-stock banks, the China Banking Regulatory Commission (CBRC) asked lenders to assess the credit risk and potential asset losses that loans to borrowers in sectors with overcapacity posed, said the people who had seen the memo.
The CBRC also asked banks to accelerate their disposal of non-performing loans, investigate innovative ways to handle bad debt and diversify their methods.
The CBRC did not immediately respond to requests for comment.
"For firms which are having difficulties, you can refinance, extend payment periods or restructure in order to help them get through difficult times," said one of the people.
At the same time, the CBRC will encourage some joint-stock banks to start investment pilot projects and asset securitization among other things in order to improve cash flows.