Liu Mingkang, chairman of China's Banking Regulatory Commission (CBRC), on Tuesday said the regulator will prohibit bank loans from entering the stock market in an effort to enhance risk control for Chinese banks.
Liu said the CBRC will also ban banks from providing guarantees for corporate bonds, highlighting the need for banks to strengthen their lending supervision.
The CBRC will urge banks to improve their provision coverage ratios and improve their ability to counter risks.
According to Liu, bad loans from commercial banks and rural lenders amounted to 3 trillion yuan in 2002, accounting for one-third of total outstanding loans.
However, this figure was reduced to 800 billion yuan ($125 billion) in 2010, accounting for just 2 percent of total loans, Liu said.
Average capital adequacy ratios have also risen to more than 12 percent since 2002, while provision coverage ratios rose to 170 percent in the same amount of time, Liu said.