In a continued effort to cool banks’ lending growth this year, and cool China’s property market, China’s banking regulator will require banks to present risk reports detailing their exposure to the property industry by the end of June.
The regulator will then make inspections during the third quarter and force banks to increase their provisions where ever asset (property loan value) downgrades are made.
“We’ve found that banks’ risk exposure to the property market is pretty big,” China Banking Regulatory Commission director Liu Mingkang told the Boao Forum.
He said banks are required to tighten up their oversight of loans to local governments for land development projects, loans to property developers as well as mortgage lending.
“We’re requiring that banks follow up each government land auction to make sure the money from the auction goes to the right bank account,” he said.
Even if they’re just half as successful as they expect/are supposed to be in rooting out problematic lending, one can imagine that these efforts will discover some serious losses in Q3. So while many might criticise the effectiveness of such regulatory efforts, you can’t write them off completely.
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