Shanghai's banking regulator has told domestic commercial banks in the commercial hub to keep up lending to small firms and increase their tolerance for bad loans, two sources told Reuters on Wednesday. The Shanghai branch of the China Banking Regulatory Commission, the country's banking regulator, has issued a notice telling banks to actively implement policies on renewing loans for small firms, according to the sources.

Chinese banks' non-performing loans are already at nearly 2 percent, the highest since the global financial crisis in 2009, according to the China Banking Regulatory Commission (CBRC). The sources, who declined to be identified, said banks must refrain from raising the threshold for small firms when they ask for renewing loans, and should increase their tolerance for bad loans.

Banks needed to establish systems to check credit made to small businesses on a annual basis and conduct investigations into firms before renewing their loans, the sources said. Officials at the banking regulator in Shanghai were not immediately available for comment.

Copyright Reuters, 2016