In what follows it will help to have an understanding of how banks make loans and the differences between the type of money created by the central bank, and money created by commercial (or ‘high-street’) banks.
These risks include the ability of the borrower to repay the loan, and the validity and enforceability of the guaranty.
Every share of stock gives the holder an equal right to the retained earnings as any other share.
So any rights to the distribution of retained earnings are represented by the number of shares that a stockholder owns, not on any agreement, as in a partnership.
Non-performing loans that turn into bad debt or dead loans are a problem for China's banking industry. Previously, Chinese banks have given the impression that their risk controls for loans are unsuccessful because the banks own a disproportionate number of bad loans.
These banks are now paying more attention to the supervision and management of the risks, with this effort reducing the amount of bad debt at Chinese banks.