(Bloomberg) watchers are starting to put a price tag on what any collapse in the nation’s red-hot property market could cost banks.
A drop of 30 percent in housing prices could cause 4 percent of total loans worth 4.1 trillion yuan ($615 billion) to sour, according to DBS Vickers Hong Kong Ltd. Commerzbank AG said such a drop could trigger 4 trillion yuan in delinquencies. Pacific Investment Management Co. expects the non-performing loan ratio to peak at 6 percent in the next few years from the current 1.75 percent, amid risks from the property sector.
While bank losses under those scenarios would be a far cry from the $1.3 trillion in the U.S. after the 2008 financial crisis, economists are increasingly anticipating a banking system bailout that could rock the stock market and push up government borrowing costs.
