BEIJING--China's central bank has extended the grace period for the country's banks to comply with new asset management rules aimed at reining in risking lending practices in the financial system.
The People's Bank of China said in a statement on Friday that it would give banks one more year to fully adapt to the new rules, which require them to set aside more capital for loans repackaged as investment products and ward off risks from shadow banking activities. The central bank had previously required all banks to comply with the rules by the end of 2020.
The PBOC said the extension gives financial institutions sufficient time to adjust to the new rules since both borrowers and banks have been hit hard by the coronavirus pandemic.
Bad loans at Chinese banks kept rising this year, as the world's second largest economy reported its biggest contraction in the first quarter when economic activity nearly ground to a halt amid efforts to control the spread of the virus.
The state council last month asked banks to reduce their profits to offer more support for struggling business and to provide cheap loans to risky borrowers struggling to keep their business afloat amid the pandemic.
The central bank said in its statement that the extension doesn't suggest any change in the requirements set out in 2018 when it unveiled the new rules that regulate $12.9 trillion worth of assets. The PBOC told lenders to grab the time to offload assets that run against the rules.