China’s major banks are urging regulators to relax some legal and contractual requirements to free a logjam of loans and other transactions halted by China’s Covid-19 surge.
Lenders in China require documents to be stamped with the seal at the branch counter to disburse larger loans or grant foreign exchange, but lockdowns related to the recent Covid-19 surge mean customers and staff have not been able to meet.
Many bank branches were either closed or were severely understaffed so companies – from small firms to Fortune 500 state-owned enterprises – could not meet documentation requirements, leading to lenders refusing to provide services.
The development worsens the situation for companies, already battling falling demand and supply-chain disruptions caused by the lockdowns, and hampers Beijing’s plans to reverse an economic slowdown through easier availability of credit and bulking up of services.
And even as the Chinese financial hub of Shanghai has eased harsh lockdown rules after the Covid-19 surge, several bankers said it would take time for the backlog of transactions to be cleared and for full banking services to resume.
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No Clear-Cut Answers
There are also concerns that another Covid-19 surge could see curbs being imposed again.
Bankers have urged regulators to relax some of the documentation rules, but have not received any clear-cut answers or commitments, according to the sources.
“We had to have discussions in each city with each regulator – which were all having different interpretations,” said one senior banker at a global lender, referring to attempts to seek a relaxation in documentation rules to provide banking services.
The regulators did not provide an official relaxation of policy but in summary said “we will close our eyes, but if there’s a screw-up we will scream and punish you saying how come you didn’t follow the regulations,” he added.
One large state-owned lender was told by regulators they should have had a contingency plan to handle the disruptions caused by the lockdowns, but didn’t allow for any flexibility.
The China Banking and Insurance Regulatory Commission (CBIRC) did not respond to a request for comment.
- Reuters, with additional editing by George Russell
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