Global auditing firm Ernst and Young has withdrawn a report saying China's non-performing loans (NPLs) totaled over US$900 billion, apologizing for what it called an "erroneous" publication.
"As it contains errors, we are withdrawing the report," the firm said in a statement. "We apologize that this erroneous report was issued. We sincerely regret any misleading views that the report conveyed."
The size of China's bad loans is a figure of immense importance, as it serves as a measure of the banking sector's financial health.
Ernst and Young's decision came after China's central bank said the report, which claimed NPLs for the four large state-owned commercial banks totaled US$358 billion, "seriously distorted" the actual situation.
In its statement retracting the Non-Performing Loan Report, issued on May 3, Ernst and Young said a US$911 billion estimate for China's NPLs had been based on the wrong assumptions.
"Throughout the report this amount was identified as a potential future amount that includes NPLs totaling approximately US$358 billion for the big four commercial banks," it said.
"Upon further research, Ernst and Young Global finds that this number cannot be supported, and believes it to be factually erroneous," it said.
It said the report had not gone through the normal internal review and approval process before it was released to the public.
China's central bank, which was not immediately available for comment yesterday, had adopted unusually harsh vocabulary to refute Ernst and Young's claims in a statement posted on its Web site late last week.
"The report not only seriously distorts the actual assets quality of the Chinese banking sector, its statements on several financial institutions are also seriously wrong and its conclusions are absurd and incomprehensible," the People's Bank of China Web site quoted an unnamed official as saying.
Ernst and Young said the firm was alerted to the mistake by its China branch, but said it had not been approached by the Chinese central bank or other Chinese authorities on the errors.
"Quality and integrity is what we believe in, and we have to do it right," said Annesa Leung (
The company hoped the mistake would not impact the firm's business in China, she said.
Ernst and Young's report, widely quoted earlier this month, came as foreign institutions continued to move into the Chinese banking sector and as the nation's big banks sought a higher international profile.