China bank regulator orders property loan stress tests

The China Banking Regulatory Commission (CBRC) told large domestic banks to conduct quarterly stress tests on property loans, Bloomberg reported. The announcement followed reports that China’s property and land prices continued to increase in the first quarter. Property prices in 70 cities set a record increase of 11.7% in March. China’s housing ministry added regulations on sales of uncompleted homes by developers, mortgage downpayment requirements and interest rates have been increased. CBRC said banks must carefully evaluate the risk in their property loan portfolios and set aside sufficient provisions for loans by the third quarter. The regulator also recently issued a notice requiring commercial lenders to submit reports on their risk exposure by mid-June. China’s central bank is trying to decrease new lending by 22% this year after last year’s US$1.4 trillion lending binge.