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Tightening of loans not down to liquidity shortage, says insider

By Wang Xinyuan (Global Times)

09:56, July 09, 2013

Tightening of housing and car loans by banks is not necessarily related to the recent liquidity squeeze, but is more likely to be intended to differentiate among products, a bank trader told the Global Times Monday.

According to recent media reports, commercial banks have tightened housing and car loans, with some blaming the liquidity squeeze.

"I submitted a car loan application at the end of June, and was told that it takes three to five days to process, but after two weeks the money is not yet available," Beijing Daily quoted a consumer as saying in a report on Monday.

Some banks are now more picky about car loan applicants, especially China Construction Bank, a Volkswagen car dealer in Beijing's Shijingshan district told the Global Times Monday on condition of anonymity.

"They now require applicants to prove they have a high-paying job and strong credit history," he said, which means that some applicants may not be able to get a loan under the current tougher standard.

Previous media reports also said that banks had canceled preferential mortgage rates and prolonged the loan approval process for home buyers, because of the sharp rise in the interbank lending rate in late June when the central bank refused to inject more liquidity into the market.

Customer services staff at both China Construction Bank and China Merchants Bank told the Global Times that they had not changed their rules regarding car loan approval.

Currently, interbank liquidity has eased and it should not be the cause of tightened bank ­le­nding, Hao Yijun, a trader at Guangfa Bank, told the Global Times.

Moreover, banks usually allocate enough capital for bank lending before having the remaining assets traded in the interbank market, Hao said.

The Shanghai interbank lending rates have been falling since June 20 when the overnight lending rate rose to a record high of 13.44 percent. The major short-term lending rates - including overnight, one-week and two weeks - all fell below 4 percent on Monday, back to same level as earlier in the year.

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