It is reported that the State Council is considering lowering the ratio of provisions bank must set aside for bad loans.

ANBOUND's research team believes that the State Council has considered mulling lower minimum bad-loan coverage for banks because the government wants to free up more funds for financing.

In light of the current trend to "deleveraging", “cutting industrial overcapacity” and prevention of systemic risk, such a decision will bring great uncertainty to the banking industry and hence careful consideration should be given prior to the introduction of the measure.