Housing prices decline no big concern: Chinese banks

15:06, May 05, 2010      

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Even if the newly-adopted policies lead to a 30 percent decline of housing prices, non-performing individual mortgage loans will not increase significantly, say China's banking institutions.

The Bank of Communication (BOCOM) has conducted stress tests at the request of the China Banking Regulatory Commission (CBRC), said its vice president Qian Wenhui. If property prices fell 30 percent, non-performing individual mortgage loan rate will rise only 0.9 percent.

Qian said that the banks is confident in dealing with this kind of problem due to its relatively low proportion of real estate related loans. "If a more substantial price decline or a systemic risk occurred, we would certainly suffer more impacts."

A senior executive of China Construction Bank noted that if house prices fell 30 percent, the effects of non-performing mortgages on the bank would be roughly the same as they are for the BOCOM.

China MinSheng Banking Corp, Ltd has a more optimistic view. Its president Hong Qi said that even if house prices fell 40 percent, its asset quality would not be affected.

A report from the China International Capital Corporation (CICC) yesterday shared the same estimation that real estate development loans and bad mortgage loans will not evidently increase if house prices fell 30 percent.

The CICC noted that their report is based on information collected from banks, rather than merely prediction.

Liu Mingkang, chairman of the CBRC required on April 20 that commercial banks should actively implement the regulation policies, strengthen land reserve loans management, effectively keep a tight control over housing loans risks and execute dynamic and differentiated managed individual housing loans policies to strictly curb real estate speculation.

It's notable that several industrial insiders claim that housing mortgage loans are of relatively higher quality. "The real estate industry is currently China's economic pillar, and will remain so in the future. Even though the property market is facing overheating and bubbles in some region, but it still has a bright outlook," said Qian Wenhui.

By People's Daily Online


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