China strengthens lending regulations, focuses on credit risk control

07:38, February 21, 2010      

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China's banking regulator has issued two regulations that aim to tighten banks' lending and risk management controls.

Banks must set a lending quota after "prudent calculation" of borrowers' "actual demand" and must not lend excessively, the China Banking Regulatory Commission (CBRC) said in a statement on its website on Saturday.

Banks are also required to improve risk control after granting loans and to be aware of factors that might influence the repaying capabilities of borrowers through inspections and monitoring, the statement said.

For personal lending, CBRC asked banks to be more sophisticated in the management of the lending process, especially on the use of the loans, according to the regulation.

Borrowers will not be able to obtain loans without declaration of a specific use, and they should meet bank representatives in person to avoid false claims, according to CBRC.

The regulations took effect on Feb.12 and aim to achieve systematic management of credit risk and avoidance of loan appropriation, the statement said.

China's banking regulator asked lenders to keep 2010 credit growth at a reasonable pace last month and vowed to tighten supervision of property loans amid increased concern about an asset bubble.

Liu Mingkang, the CBRC chairman, said on Jan. 27 the Chinese government is aiming to restrict credit supply to 7.5 trillion yuan (about 1.1 trillion U.S.dollars) in 2010.

China has raised the deposit reserve requirement ratio (RRR) twice this year, after holding it steady for over a year, to handle the "comparatively loose liquidity" while keeping the "moderately easy" monetary policy unchanged, according to the central bank.

China's yuan-denominated lending in 2009 hit a record 9.59 trillion yuan, almost double that of the previous year. New yuan-denominated lending in January stood at 1.39 trillion yuan, down 14.2 percent from a year earlier, according to the People's Bank of China, the central bank.

Source: Xinhua
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