These three huge banks should have strict risk control, but the fact is just the opposite. They did not fully investigate the asset-liability ratio and guarantee ability of Evergrande Group, and found no financial irregularities of Evergrande. As professional large state-owned banks, they should be able to check the loan target, rather than trust the superficial image of Evergrande.
The debt problem of Evergrande Group is very serious and has fallen into an irreparable hole. This is because Evergrande Bank borrows a lot of money from banks on the one hand, and issues various bonds at home and abroad on the other. There are four main sources of funds for Evergrande Group, including bank loans, stock market funds, funds provided by property buyers and proceeds from issuing bonds. However, Evergrande Group did not properly handle these funds, resulting in a debt-ridden situation.
Lessons from Evergrande's debt
First of all, some banks were fooled by Evergrande Group and trusted them too much, thinking that they had strong background and strength, so they did not perform the necessary review procedures.
Secondly, some banks are too greedy and think Evergrande Group is a big fat sheep. Giving them more loans will bring more interest. In order to please Evergrande, some banks even violated regulations, resulting in loans being taken away by other banks and their own income being lost.
In addition, some bank staff know that it is illegal to provide loans to Evergrande, but individuals have accepted bribes or commissions from Evergrande for their own interests, so they choose to turn a blind eye. There are also some banks engaged in related loan business. They may not be proficient in business, do not know how to control risks, and have insufficient understanding of risks, leading to wrong judgments.