New directive tightens property loans
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Close ties between commercial banks and the property industry have aroused the Government's attention.
The central bank's Shanghai branch issued a directive on Tuesday, requiring all financial institutions to tighten property lending management and optimize the lending structure to stabilize Shanghai's monetary credit.
"There are several problems during the process of lending money to clients that need to be addressed," said the directive.
The major problem lies in "the quickened pace of providing loans, with the growth rate jumping from 9.4 per cent by the end of April to 12 per cent by the end of July."
Meanwhile, commercial banks' ties with the property industry "lead to the fluctuation of lending since the growth of lending is closely related to the property trading volume."
At present, all commercial banks must focus "on the market conditions of the property industry and the effects of macro-control moves, further improving the risk management of providing a loan, and properly dealing with the problems caused by deferred payment."
At the same time, the Shanghai branch asked all financial institutions to "address the quality of property developers' financial chains and make good preparation to defend the risks."
"Urban infrastructure construction" and "land reserves" are considered by the Shanghai branch to be the two most risky areas to offer loans. All the financial institutions are required to address the potential risks within these two areas.
As for the personal housing mortgage, commercial banks are encouraged to create new lending products for house purchases to support reasonable housing consumption.