TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
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They are preparing for the day when borrowers default
Reuters
19 July 2011
While investors fret about a jump in bad loans from China’s local government entities, the country’s so-called ‘Big Four’ banks are busy squirreling money away for the day when borrowers start defaulting in large numbers.
Having been warned by Beijing in 2009 to beef up their risk management systems, these lenders boast more cash than many of their European and US peers did before the global financial crisis.
That cash pile may see its first major test since the financial crisis - indeed, since the lenders were recapitalised by the government starting more than a decade ago - on increasing signs many entities created by local governments to finance infrastructure projects could face trouble repaying their loans.
Investors have already beaten down bank shares.
Hong Kong shares of China Construction Bank have fallen over a fifth since June, far worse than the 8 per cent decline in the Hang Seng Index. Shares of Industrial and Commercial Bank of China (ICBC) are down 15 per cent and both Bank of China and Agricultural Bank of China have lost about 20 per cent.
The banks, however, show little sign of worry just yet, and many analysts said worries over their health have been blown out of proportion.
China’s banking system has a bad loan coverage ratio of about 220 per cent, or 1.2 trillion yuan (S$226 billion), to cover any losses, up from 80 per cent at the end of 2008 and compared with 150 per cent last year.
On top of shoring up their capital bases, lending procedures have also been tightened, with sources at ICBC, the world’s largest bank with a market value of US$240 billion, saying that all loans above 10 million yuan now have to be approved by its risk department in Beijing before the money is handed over.
‘The current fear we see out there is just unbelievable,’said Paul Schulte, head of financial strategy at the investment banking arm of CCB, China’s biggest mortgage lender. ‘It’s almost like a child dropped his ice cream cone and there’s no more ice cream left in the world.’
The big Chinese banks boast some of the lowest loan-to-deposit ratios and some of the highest coverage ratios on bad loans in the world. Non-performing loans have fallen consistently, even as their books grow and the banks set aside more money in case of bad loans.
Standard & Poor’s said last week that strong economic growth in China would likely limit the credit costs of local government debt and cushion any blow to the country’s major banks, and that it does not expect any of them to report a loss if growth keeps up.
For example, CCB had a loan-to-deposit ratio of 62 per cent at the end of 2010. By comparison, Lloyds clocks in at 155 per cent while Spain’s BBVA stands at 152 per cent.
The China Banking Regulatory Commission (CBRC), which overlooks the industry, requires banks in the country to have a loan-to-deposit ratio of no higher than 75 per cent.
On lending to local government financing vehicles (LGFV), which are said to be a potential hotspot for a possible spike in loan defaults, the Chinese banks say they have set aside a healthy buffer should they go sour.
China’s national audit office says LGFVs borrowed some 10.7 trillion yuan at the end of last year, while Moody’s says the real number is closer to 14.2 trillion yuan.
All agree that a significant portion will go sour, with Moody’s worst-case scenario putting the figure at 12 per cent.
ICBC says it had a bad loan coverage ratio on LGFV loans of 1,009 per cent at the end of last year. This means that even if the number of LGFV bad loans jumped 10 times tomorrow, the bank would still have a comfortable enough buffer to cover them all.
‘The regulator is now closely monitoring local government debt,’ said Victor Wang, an analyst at Macquarie Securities. ‘The setting up of new local government financing vehicles is almost mission impossible.’
Under Moody’s worst-case scenario, it would mean that banks could be liable for about 1.7 trillion yuan worth of bad loans.
While that number is high, China’s high bad loan coverage ratio of about 220 per cent, or 1.2 trillion yuan, suggests banks already have more than two-thirds of the necessary funds needed to pull through the worst-case scenario spelled out by Moody’s.