China’s banking regulator said Thursday that the stress tests it required for Chinese banks’ property credit do not reflect the government’s assessment of market trends or potential loan policy changes, the Wall Street Journal reported. The comments were intended to ease worries after property and bank shares dropped on news that lenders were testing the possible impact of a plunge in real estate prices. The China Banking Regulatory Commission told commercial banks to conduct stress tests on their property credit to analyze the impact on loan quality when China’s average property prices drop by 10%, 20% and 30%. "The stress test is one of the forward-looking risk management tools that commercial banks often use and is needed for commercial banks to increase their risk management level," CBRC said in the statement. Recent data shows that China’s property prices fell on a month-to-month basis in June for the first time since February 2009, and gains on an annual basis continued to cool off.
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