Core Insights - The People's Bank of China released the "China Financial Stability Report (2025)", which includes stress test results for the banking sector, public funds, and open bank wealth management products [1] Banking Sector Stress Tests - A total of 3,235 banks were tested, including various types such as state-owned commercial banks, joint-stock commercial banks, and rural banks [2] - The macro scenario stress tests showed that 23 participating banks have strong resilience against economic shocks, with credit risk being the primary factor affecting capital adequacy [2][3] - Under different stress scenarios, the non-performing loan (NPL) ratio is projected to rise significantly, reaching 6.55% in a severe scenario by the end of 2027 [3] Capital Adequacy and Profitability - The overall provision coverage ratio for the 23 banks was 240.9% at the end of 2024, well above regulatory requirements, and the overall asset profitability was 0.71% [4] - In severe stress scenarios, capital adequacy ratios could decline, but pre-loss profits could enhance capital adequacy by 5.23 percentage points [4] Sensitivity and Liquidity Risk Tests - Sensitivity tests indicated that banks have a certain level of resilience against asset quality deterioration, with capital adequacy ratios dropping under various stress scenarios [5] - Liquidity risk tests showed that 98.49% of banks passed under light stress conditions, and 96.29% under severe stress, indicating improved liquidity compared to 2023 [6] Non-Banking Institutions and Fund Management - The liquidity stress tests for public funds showed strong management capabilities, with only 0.01% of funds failing under light stress and 0.34% under severe stress [8][9] - For open bank wealth management products, 3,690 products were tested, with 171 failing, representing 4.6% of the total, indicating manageable liquidity risk [9]

Core Viewpoint - The People's Bank of China released the "China Financial Stability Report (2025)", which includes stress test results for the banking sector, public funds, and open bank wealth management products, indicating the resilience of the financial system under extreme but plausible adverse shocks [3]. Banking Sector Stress Testing - The stress tests involved 3,235 banks, including various types such as state-owned, joint-stock, and rural banks, assessing their resilience to macroeconomic shocks and credit risks [5]. - The macro scenario stress tests showed that 23 participating banks have strong resilience to economic shocks, with credit risk being the primary factor affecting their capital adequacy [5][6]. - Under light, moderate, and severe stress scenarios, the non-performing loan (NPL) ratio for these banks is projected to rise significantly, reaching 3.08%, 5.02%, and 6.55% respectively by the end of 2025, 2026, and 2027 under light stress [6]. Sensitivity and Liquidity Risk Testing - Sensitivity tests indicated that the banking sector has a certain level of resilience to asset quality deterioration, with capital adequacy ratios dropping to 14.76%, 13.44%, and 10.54% under varying levels of asset quality stress [9]. - Liquidity risk tests showed that overall liquidity is sufficient, with 98.49% of banks passing under light stress and 96.29% under severe stress, indicating an improvement from 2023 [10]. Contagion Risk Testing - Contagion risk tests conducted on 60 larger banks revealed that the banking sector can withstand defaults from individual banks without significant contagion effects, with only minimal instances of cascading defaults observed [11]. Public Fund and Wealth Management Product Testing - The liquidity management capability of public funds was assessed, showing strong results with only 0.01% of funds failing under light stress and 0.34% under severe stress, a decrease from the previous year [13]. - For open bank wealth management products, 3,690 products were tested, with 4.6% failing the liquidity test, amounting to 830.53 billion yuan, indicating manageable liquidity risks [13].

Core Viewpoint - The People's Bank of China conducted stress tests on 3,235 banks, 13,888 public funds, and 3,690 open-ended bank wealth management products to assess their resilience against extreme liquidity and credit risks in the financial system [1][2][8]. Group 1: Bank Stress Testing - The stress tests included macro scenario tests, sensitivity tests, liquidity risk tests, and contagion risk tests, covering various types of banks [2][5]. - A total of 3,235 banks participated, including large state-owned banks, joint-stock commercial banks, urban commercial banks, rural commercial banks, and foreign banks [2]. - The macro scenario tests indicated that 23 participating banks showed strong resilience to economic shocks, with credit risk being the primary factor affecting their capital adequacy [2][3]. Group 2: Credit Risk Analysis - Under different stress scenarios, the non-performing loan (NPL) rate for the 23 banks is projected to rise significantly, reaching 3.08%, 5.02%, and 6.55% by the end of 2025, 2026, and 2027 under light stress [3]. - In moderate and severe stress scenarios, the NPL rates are expected to increase to 3.18%, 5.32%, 7.29% and 3.48%, 5.96%, 8.25% respectively [3]. Group 3: Liquidity Risk Testing - The liquidity risk tests showed that the overall liquidity of the participating banks is sufficient, with a pass rate of 98.49% under light stress and 96.29% under severe stress [6][9]. - The tests also indicated that the liquidity management capabilities of public funds are strong, with only 0.01% of funds failing under light stress and 0.34% under severe stress [8][9]. Group 4: Wealth Management Products - The liquidity risk for the 3,690 open-ended bank wealth management products was found to be manageable, with only 171 products failing the tests, representing 4.6% of the total [9]. - The total scale of these products is approximately 11.79 trillion yuan, indicating significant market presence [1][9]. Group 5: Contagion Risk Assessment - The report highlighted that the banking sector has the capacity to withstand defaults from individual banks, with limited contagion effects observed among non-bank financial institutions [7]. - In scenarios where defaults occur, the maximum contagion rounds were limited to one, indicating a relatively contained risk environment [7].