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China proposes banks distribute excess loan provisions as dividends

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China proposes banks distribute excess loan provisions as dividends

China's Ministry of Finance proposed banks with provision coverage ratios exceeding 300% to distribute reserves beyond that amount as dividends.

The ministry said banks might be "trying to hide their profits" by setting aside provisions against nonperforming loans more than the regulator asks, according to the statement released Sept. 26.

Banks are required to hold a minimum provision coverage ratio of 150%, according to the ministry.

The average provision coverage ratio of Chinese commercial banks' provision coverage stood at 190.61% as of June 30, according to data from the China Banking and Insurance Regulatory Commission.

The ministry will be accepting public feedback on the draft rules until Oct. 26.