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October 12, 2009

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Regulator warns banks over lending

SHANGHAI'S banking regulator has asked lenders to stop offering incentives to attract deposits and stick to the 40 percent down-payment rule for second homes to ensure fair competition.
The Shanghai bureau of the China Banking Regulatory Commission has issued a notice to lenders, requiring them to strictly follow existing rules and regulations on deposits, individual mortgages and bank cards to drive out "over-competition."
"The regulator will take action on banks or individuals that make unfair competition," the local banking regulator said over the weekend.
For the second time in three months the regulator emphasized the importance of a minimum down payment of 40 percent for second homes to help stop real estate speculation.
Individual mortgage volume has kept rising since March on the back of a booming market in the city. Some banks ignored the down-payment rule to boost profits from the lucrative mortgage business.
Individual mortgages were the banks' most profitable personal banking services, said an earlier McKinsey & Co report.
The Shanghai Banking Association will help banks establish citywide practices on incentives for home agents who bring mortgage business to lenders.
The Bank of Communications and other big state-owned banks stopped offering a 1.5 percent commission to home agents from the start of this month, sources said earlier.
Banks are also banned from offering cash, gifts or reimbursement to attract deposits.
The new notice comes just two weeks after the regulator announced stricter rules on credit cards. Late last month, the regulator, responding to rising problems related to a surge in the number of credit cards, said lenders will no longer be allowed to outsource the business of signing up new cardholders.
The regulator warned banks against incentives that reward salespeople only on the basis of how many new cardholders they bring in. The regulator said it found that the credit card business at many banks is poorly regulated, and it is requiring banks to tighten their monitoring and management of these cards.


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