State-owned commercial banks mainly adopt three methods to reduce the non-performing loan ratio:
Stripping off non-performing assets
As early as 1999, the China municipal government established four asset management companies, namely Cinda, Dongfang, Great Wall and Huarong, and stripped off 1.4 trillion non-performing assets for the four state-owned commercial banks. However, while disposing of non-performing assets, new non-performing loans are constantly emerging.
Therefore, in 2003, Industrial and Commercial Bank of China and China Construction Bank cooperated with world-renowned investment banks Goldman Sachs and Morgan Stanley to divest non-performing loans for the second time. Then, in 2004, the government helped China Bank and China Construction Bank divest 270 billion non-performing assets.
High price difference
Since 1996, the government has implemented a high interest rate spread policy of high loan interest rate and low deposit interest rate, and the People's Bank of China has lowered the deposit interest rate for eight consecutive times. The high spread policy has increased the profits of commercial banks' indigestible loans.
However, the high spread strategy has three disadvantages:
① The speed of indigestion loans is too slow;
(2) Sacrificing the interests of depositors;
③ It is easy to induce the speculation of commercial banks and excessively expand the credit scale in pursuit of profits.
Expand the scale of credit
Commercial banks can not only make use of the high interest spread policy to make profits, but also increase the denominator of non-performing loan ratio and dilute non-performing loans. But in fact, it did lead to the excessive expansion of credit scale.