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Regulators Name and Shame Banks Violating Loan Rules

By Guo Yingzhe and Wu Xiaomeng / Nov 19, 2019 02:57 PM / Finance

Photo: VCG

Photo: VCG

China’s central government has named and shamed two banks that forced small businesses to buy insurance products as a condition of issuing loans, saying such misconduct violated official instructions to cut borrowing costs for small businesses.

China’s regulators have made efforts to slash the cost of borrowing for small businesses and privately owned enterprises in order to shore up its slowing economy amid sluggish domestic and global demand as well as an ongoing trade war with the U.S. Large banks in China tend to prefer lending to large companies and state-owned enterprises as doing so usually involves less risk.

Some managers at the Beijing branch of China Construction Bank forced small commercial borrowers to buy life insurance products developed by the bank’s life insurance subsidiary, and forced them to buy property insurance for their collateral when issuing loans, the State Council — China’s cabinet, and the China Banking and Insurance Regulatory Commission (CBIRC) — said in separate statements on Monday.

As one of the country’s five largest state-owned commercial banks, China Construction Bank has been told to boost lending to small businesses this year. Outstanding loans by the “Big Five” to small businesses — defined as those with total credit lines lower than 10 million yuan ($1.42 million) — stood at 2.52 trillion yuan at the end of September, up 47.9% compared with the end of 2018, Zhu Shumin, a vice chairman of the CBIRC, said at a press briefing last month.

Read the full story on Caixin Global later today.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com)

Related: In Depth: Banks Go to War to Meet Beijing’s Goal of Lowering Rates for Small Businesses

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