© Reuters. FILE PHOTO: Paramilitary police officers stand guard in front of the headquarters of the People’s Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. REUTERS/Tingshu Wang/File Photo
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BEIJING (Reuters) – Chinese commercial banks need to maintain a proper level of profit and net interest margins to ensure sustainability in supporting the real economy, China’s central bank said in a monetary policy implementation report on Thursday.
Banks’ net interest margins and rate of return on total assets are in a downward trend due to lowering lending rates, the People’s Bank of China said in a special column of the report.
“China’s economic operation is facing many difficulties and challenges,” the report said. “It is necessary to give further play to the important role of banks in serving the real economy and smooth the virtuous circle of economy and finance.”
Banks should have certain financial capabilities and risk buffers, as the exposure of banks’ credit risks usually lags a certain time behind the economic cycle, it said.
The central bank also said it is normal to see banks’ profit conditions fluctuate with the economic cycle, which should be treated rationally.