Liu Mingkang, head of the China Banking Regulatory Commission, told a Asian economic forum that China’s financial institutions had until the end of the June to submit “comprehensive” reviews of their loan books.
Liu Mingkang told the Bo’ao Forum for Asia. “We asked all the banks to hold back and monitor [their lending portfolios] project by project.”
Local governments in China have borrowed heavily from banks for pet investment projects, often posting large tracts of vacant land as collateral. Unofficial estimates of their resulting exposure run as high as $1.676 trillion.
Chinese banks have also been told to insist on buildings and other tangible assets for collateral, rather than empty plots of land.
Mr. Liu said the policy was “real and firmly backed up by the State Council,” referring to the Chinese cabinet. He added that where necessary the regulator would “downgrade assets and increase provisions.”
Financial Times said Liu Mingkang cited the residential property sector as another area of concern. He said the regulator has ordered banks to increase down-payment requirements for second-home purchases and to compile lists of “approved” developers.