Caixin
Oct 13, 2016 04:58 PM
PROPERTY

PBOC Orders 17 Banks to Curb Housing Loans

(Beijing) – China's central bank summoned executives from 17 banks to its offices in western Beijing on Wednesday and demanded that they step up efforts to rein in home loans amid a nationwide property-market frenzy.

The in-person directive from the People's Bank of China (PBOC) followed a slew of stringent measures from numerous Chinese cities aimed at curbing the housing market.

Several bank executives told Caixin that senior officials and lending-department managers from the 17 banks, including the state-owned "Big Five," attended the meeting, where the PBOC demanded that the banks adjust their respective lending structures, keep a tight rein on granting home loans and better manage their risks.

China's big five banks are the Industrial and Commercial Bank of China, China Construction Bank, the Bank of China, the Agricultural Bank of China and the Bank of Communications.

Sources told Caixin that regulatory authorities will take measures to keep commercial bank lending from going to the housing market, and the government will conduct more supervision and inspections of financial institutions over their issuance of home loans.

New loans in August reached 948 billion yuan ($141 billion), more than double the figure a month before, data from the People's Bank of China showed. Over 71 percent of the loans went to households.

During the weeklong National Day holiday at the beginning of this month, more than a dozen cities rolled out stringent measures to cool the housing market, including increasing the minimum down payment required for both first- and second-home purchasers. In Beijing, for example, families that already own a unit must provide a 50 percent down payment for a second home, up from 30 percent.

The next step may be to increase the interest rates on mortgage loans, a bank source told Caixin. Banks in some areas had lowered their rates on home loans amid cutthroat competition during the housing market boom.

Currently, the interest rate on mortgages is about 3.9 percent, which is lower than the benchmark lending rate of 4.9 percent for a five-year loan.

The PBOC will not put a limit on home loans as a proportion of new loans, a government official told Caixin. But the government will push ahead with the demand that new loans should be directed at the "real economy," rather than flowing to the real estate market in an excessive way.

But the official also revealed his concern about whether the central bank's directive will fully take hold.

"What the regulatory bodies can do now is merely persuade banks, and they may heed what the authorities say, but maybe not 100 percent," said the official.

Some other bankers told Caixin that even if the number of mortgage loans decline, money could still be channeled to the housing market in other forms, such as consumer credit loans.

Contact reporter Dong Tongjian (tongjiandong@caixin.com); editor Ken Howe (kennethhowe@caixin.com)

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