Economics
China's Banks Need More Capital After Credit Boom, IMF Says
- Report is first full assessment of financial system since 2011
- IMF’s stress tests showed ‘widespread under-capitalization’
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China’s banks should increase their capital buffers to protect against any sudden economic downturn following a credit boom, the International Monetary Fund said.
In its first comprehensive assessment of China’s financial system since 2011, the IMF recommended “a gradual and targeted increase in bank capital.” In a worst-case scenario, IMF stress tests suggested the country’s lenders would face a capital shortfall equivalent to 2.5 percent of China’s gross domestic product -- about $280 billion in 2016 -- together with ballooning soured loans.