Authorities are punishing banks for concealing the true amount of bad debt, a sign that Beijing is worried about fissures in the financial system.

China’s financial regulators are stepping up penalties on banks and asset managers caught hiding bad debts as Beijing grows increasingly wary of the country’s opaque cache of unpaid loans, the Financial Times (of the UK) reports.

Authorities are also increasingly worried about bad debts at smaller Chinese banks, the report said.

At least five large institutions, including  a branch of the Industrial and Commercial Bank of China, aka ICBC, have been penalised, although The FT said that the penalties were “relatively small”.

Bad debts have been at historic highs in China, up by more than 40 per cent at some small banks, it said.

The deceleration of the Chinese economy, with the added pressures caused by the US-China tariff fights, have put a harsher spotlight on potential fault-lines in the Chinese financial system.