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Real estate industry

China's Banking Regulator Urges Commercial Banks to Rein in Lending in Real Estate Sector

Strategic Insights

— 1 min read

China's banking regulator has urged commercial banks to take measures to curb the increasing level of lending in the real estate sector. As part of measures to rein in bank lending, the regulator is urging that down payments for mortgages on expensive homes and investment properties be significantly increased. Chairman of the China Banking Regulatory Commission (CBRC), Liu Mingkang, emphasized the importance of banks keeping a close watch on borrowers' repayment ability and their credit status. Banks are being encouraged to promote loans for first-time home owners, while stopping mortgages for anyone other than the home owner. The regulator is also considering stricter requirements on banks with capital adequacy ratios of less than 8 per cent and restricting certain types of property lending. These measures are seen as an attempt to keep China's rapid growing economy from overheating.

Key Takeaways:

  • The China Banking Regulatory Commission (CBRC) is urging commercial banks to curb lending in the real estate sector, with a focus on increasing down payments for mortgages on expensive homes and investment properties.
  • Chairman Liu Mingkang emphasized the importance of banks keeping a close watch on borrowers' repayment ability and their credit status.
  • Banks are being encouraged to promote loans for first-time home owners, while stopping mortgages for anyone other than the home owner.
  • The CBRC will take a targeted approach to controlling lending, with stricter requirements on banks with capital adequacy ratios of less than 8 per cent.
  • The regulator is also restricting certain types of property lending, such as setting quotas of loans with local and provincial governments.

Statistics:

  • Property prices in 70 large and medium-sized Chinese cities witnessed an average 5.5 per cent increase in the first quarter from the same period in 2005 (Source: National Bureau of Statistics).
  • China's total loans stood at 20.6 trillion yuan (US$2.57 trillion), up 14.7 per cent over the previous year, at the end of the first quarter.
  • The central bank raised the one-year benchmark lending rate by 27 base points to 5.85 per cent in a bid to curb credit and investment growth.

Sources:

  • State Council (XIC) 26-05 1442
  • China Banking Regulatory Commission (CBRC) statement posted on the commission's website.

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