Banking News

Chinese banks allowed to form “committees” to curtail company bad debts

(9 September 2016 – China) Lenders to troubled Chinese companies can set up debt committees to assist with debt restructuring, the country's banking regulator has announced, as more firms get into financial difficulties and are unable to repay their loans.

As the country's growth rate stutters, increasing numbers of borrowers are defaulting on the loans.

The aim of the committee, which can be set up on a voluntary basis, is to "guide firms with their debt restructuring, help troubled firms to resolve their troubles," among other things, the China Banking Regulatory Commission said in a notice posted on its website.

A committee can be set up for any troubled firm which is seriously in debt by three or more of its creditors, the notice said.

The committee should safeguard the rights and interests of banks as well as organise orderly debt restructuring for firms.

Any financial institutions connected to the borrower, in principle, can join such committees, the notice said.