Loan clamp to ease land speculation
By Pan Xiaoyi |
April 12, 2010, Monday
|
Print Edition
Print Edition
CHINA'S banking regulator is strictly controlling loans for land and home purchases in a bid to reduce speculation in the property market
Banks should increase their awareness about financial risks and raise the down payment ratio "by a large margin," said the China Banking Regulatory Commission last night.
Down payment ratio of a second or more houses should be no less than 40 percent and the interest rates should be strictly in line with risks, it said in a statement.
Liu Mingkang, chairman of the commission, urged all lenders, right down to the smallest bank sub-branches, to use credibility ranking systems to carefully choose borrowers among both individuals and property developers.
At the Boao Forum for Asia in south China's of Hainan Province yesterday, Liu said the central bank had established a "credibility list" and the watchdog had a blacklist to share with lenders.
Credit providers had the right to reject loan requests from property speculators, he said.
He reiterated the importance of the difference between first and second mortgages as a way to head off speculators and concentrate on the housing needs of average people.
"The risk exposure in the real estate market is huge," Liu said.
He also said the housing industry needed further reform in areas such as the land-auction system and that real estate developers needed attention.
In efforts to rein in loans to property developers, banks were ordered last month to stop offering new credit lines to those that held land without building houses and toughen scrutiny of loans to the 78 central government-controlled companies told to exit the real estate sector.
Liu said new yuan loans this year may reach 7.5 trillion yuan (US$1.09 trillion) to bolster the economic recovery.
The watchdog has set a framework of risk control to better manage new lending. The nation's lenders were asked to report to the banking regulator on their risk exposure by the end of June.
This would be followed by checks by inspectors from the commission in the third quarter. "By the end of the third quarter we will downgrade assets and increase provisions if necessary," Liu said.
Banks should increase their awareness about financial risks and raise the down payment ratio "by a large margin," said the China Banking Regulatory Commission last night.
Down payment ratio of a second or more houses should be no less than 40 percent and the interest rates should be strictly in line with risks, it said in a statement.
Liu Mingkang, chairman of the commission, urged all lenders, right down to the smallest bank sub-branches, to use credibility ranking systems to carefully choose borrowers among both individuals and property developers.
At the Boao Forum for Asia in south China's of Hainan Province yesterday, Liu said the central bank had established a "credibility list" and the watchdog had a blacklist to share with lenders.
Credit providers had the right to reject loan requests from property speculators, he said.
He reiterated the importance of the difference between first and second mortgages as a way to head off speculators and concentrate on the housing needs of average people.
"The risk exposure in the real estate market is huge," Liu said.
He also said the housing industry needed further reform in areas such as the land-auction system and that real estate developers needed attention.
In efforts to rein in loans to property developers, banks were ordered last month to stop offering new credit lines to those that held land without building houses and toughen scrutiny of loans to the 78 central government-controlled companies told to exit the real estate sector.
Liu said new yuan loans this year may reach 7.5 trillion yuan (US$1.09 trillion) to bolster the economic recovery.
The watchdog has set a framework of risk control to better manage new lending. The nation's lenders were asked to report to the banking regulator on their risk exposure by the end of June.
This would be followed by checks by inspectors from the commission in the third quarter. "By the end of the third quarter we will downgrade assets and increase provisions if necessary," Liu said.
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