Two-Edged Tightening for Bank Credit Controls

After finding that banks had not met new credit rules when writing more than 50 percent of all loans as of February, the China Banking Regulatory Commission (CBRC) decided to unsheathe a two-bladed sword.

CBRC have repeatedly warned banks of credit risk through the rest of the year. It said at least 80 percent of all new loans written by each bank in 2011 would have to strictly following the rules.

Capital and loan provision requirements would be increased for negligent banks, CBRC said. And bankers who failed to meet the standards could face the wrath of the central bank, which could impose regulatory discipline by ordering loan volume reductions, deposit reserve ratio adjustments, market access limitations, or by suspending business operations to restrict lending.