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Chinese government claims banks to reduce the mortgage loans

15 August 2011 10:02 (UTC +04:00)

Baku â€“ APA-Economics. Chinese regulators have told banks to tighten lending for real estate on concern credit risks will increase as the impact of government curbs deepens in the next three to five months, a person familiar with the matter said, Bloomberg reported.
The China Banking Regulatory Commission told lenders last month not to extend the maturity of loans to developers, not to grant new credit to help developers repay maturing debt and to set significantly higher standards on loans for commercial properties than residential, the person said, declining to be identified as the discussions were private.
The regulator aims to guard against the risk of bad loans should government efforts to cool the market cause property prices to fall. Chinaâ€™s home prices rose at the slowest pace in 11 months in July after the government imposed limits on purchases, mortgages and land sales as part of a campaign thatâ€™s lasted for more than a year.
Besides, the banks were told to be particularly alert to risks in commercial properties, where the regulator said speculative funds are increasingly flowing because of curbs in the residential market, according to the person. A 75.5 percent surge in developersâ€™ funding from overseas in the first half was also seen by the regulator as evidence of hot money entering the property market, the person said.