China Banks Urged To Monitor Exposure To Property Sector

Source : The Business Times, September 4, 2008

(BEIJING) China's banking regulator has urged lenders to stress-test the impact of a cooling real estate market and to set aside more cash to cover potential losses from property loans, local media reported yesterday.

'Banks must closely monitor changes in the real estate market and seek to limit the impact on them from the difficulties the property industry is facing in raising funds,' the Beijing Times quoted Liu Mingkang, head of the China Banking Regulatory Commission, as saying.

China's banks have cut lending to the property sector, especially since late last year, in the face of stringent lending quotas and stagnant property prices in some markets.

They provided 398.8 billion yuan (S$83.6 billion) in new loans to property developers and home buyers in the first half of this year, down 30 per cent from a year earlier, according to figures from the central bank. Total loans to the property sector accounted for 18 per cent of Chinese banks' local currency lending by the end of June, at 5.2 trillion yuan.

Mr Liu urged banks to carry out thorough estimates of their exposure to the sector and set aside more provisions to fend off systemic risks to the banking industry.

China's property market has entered a downturn after a raft of government measures to rein in excessive price rises and investment growth. In the southern city of Shenzhen, 1.7 billion yuan in mortgage loans had turned sour by the end of June, up 13.8 per cent from the start of the year, the People's Daily reported. -- Reuters