Some
banks are adopting stricter lending criteria for China's state-owned
enterprises (SOEs), demanding collateral from some companies they used
to deem as safe as government debt, as Beijing tries to reform its
bloated firms and the economy slows.
Singapore's DBS Group, which
recently suffered a loss on a bad loan to an SOE-related firm it had
assessed as risk-free, plans to launch a 'decision grid' to assess the
creditworthiness of SOEs, according to draft internal risk guidelines
reviewed by Reuters.
A banker at Taiwan's Chang Hwa Commercial
Bank said that from the beginning of this year his bank would only lend
to state-owned Chinese companies that provide collateral, in recognition
that SOEs were no longer risk free.
Such changes in policy
suggest some foreign banks are preparing for a rise in defaults in the
world's second-largest economy, which is growing at its slowest pace in a
quarter of a century and where the government is trying to make the
state sector more efficient.
DBS will now lend more
conservatively to SOEs seen as receiving less government support, as
China plans to prioritise SOEs in strategic sectors.
The
January-dated DBS document said: "Not all SOEs receive the same degree
of government support. It is our further belief that the differentiation
of such support will widen in the future as the government continues to
pursue market economy."
DBS will now divide SOEs into tiers
according to their likely level of government support, with subsidiaries
considered more risky than top-level holding companies.
Group
companies that are not consolidated into the parent SOE's financial
statements will be evaluated as an ordinary borrower, the decision grid
shows.
DBS effectively acknowledges that lenders can no longer take for granted implicit support from above.
