Call for stress tests on loans
By Winny Wang |
April 22, 2010, Thursday
|
Print Edition
Print Edition
CHINA'S banking regulator is urging larger lenders to conduct quarterly stress tests on mortgages as part of its efforts to clamp down on bad loans and control real estate speculation.
Financial institutions must follow the central government's property controls and mortgage loan policies to strictly rein in housing speculation, said Liu Mingkang, director of the China Banking Regulatory Commission, on its Website yesterday.
Banks must scrutinize lending to local government financing vehicles on a project-by-project basis and return to each loan package to reassess the risks, Liu said.
China's Cabinet has implemented stricter measures to control soaring housing prices after they jumped a record 11.7 percent in 70 major cities in March from a year earlier. The government raised the down payment requirement on second-home mortgages to at least 50 percent from 40 percent and reiterated that buyers must pay an extra 10 percent on interest rates for these homes.
It also asked banks to suspend housing loans to buyers of third or more homes where house prices rise too rapidly and too high and home supply is insufficient.
Banks can stop loans to buyers who haven't paid personal income tax or into the social security fund in the past 12 months, and local governments are allowed to cap the number of homes a buyer can own.
Liu said lenders must set aside sufficient provisions against possible loan losses by the end of the third quarter and write off any losses by the end of this year.
"Banks must attach great importance to containing full-year loan growth and better pace the flow of credit," Liu said.
The central bank is aiming at reducing new lending by 22 percent this year after a record US$1.4 trillion in credit was handed out in 2009.
Financial institutions must follow the central government's property controls and mortgage loan policies to strictly rein in housing speculation, said Liu Mingkang, director of the China Banking Regulatory Commission, on its Website yesterday.
Banks must scrutinize lending to local government financing vehicles on a project-by-project basis and return to each loan package to reassess the risks, Liu said.
China's Cabinet has implemented stricter measures to control soaring housing prices after they jumped a record 11.7 percent in 70 major cities in March from a year earlier. The government raised the down payment requirement on second-home mortgages to at least 50 percent from 40 percent and reiterated that buyers must pay an extra 10 percent on interest rates for these homes.
It also asked banks to suspend housing loans to buyers of third or more homes where house prices rise too rapidly and too high and home supply is insufficient.
Banks can stop loans to buyers who haven't paid personal income tax or into the social security fund in the past 12 months, and local governments are allowed to cap the number of homes a buyer can own.
Liu said lenders must set aside sufficient provisions against possible loan losses by the end of the third quarter and write off any losses by the end of this year.
"Banks must attach great importance to containing full-year loan growth and better pace the flow of credit," Liu said.
The central bank is aiming at reducing new lending by 22 percent this year after a record US$1.4 trillion in credit was handed out in 2009.
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