Regulator Fines Banks $1.4 Million for Property Loan Violations

The Shanghai office of China’s top banking regulator slapped 9.1 million yuan ($1.4 million) of fines on banks for property loan violations as China continues to clean up irregularities in the real estate market.

Branches of the four biggest state-owned banks—Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and Agricultural Bank of China—were penalized for issuing personal consumer loans and corporate business loans that were used in the property market, the Shanghai bureau of the China Banking and Insurance Regulatory Commission (CBIRC) said.

Problems in property-related loans were found at several Shanghai branches of China Construction Bank, including serious violations of prudent rules in reviewing loan applications, providing illegal financing to underfunded real estate projects, failure to make loans in accordance with the construction progress and capital needs of real estate projects and providing loans for real estate acquisitions that did not meet requirements, the CBIRC Shanghai bureau said.

The Ministry of Housing and Urban-Rural Development will work with other departments to hold cities responsible for weak regulation and excessively rapid increases in housing prices and will strengthen controls on real estate finance, the head of the ministry’s real estate market supervision department said earlier this month.

In March, the CBIRC, the housing ministry and the central bank ordered a nationwide inspection of business loans, targeting borrowers illicitly using individual or corporate credit to speculate in the housing market.

In the first five months of 2021, local bureaus of the CBIRC levied more than 60 million yuan of fines on banks for property-related violations, much higher than in the same period in 2020.

Home-price growth in China moderated in June for the first time this year after authorities stepped up measures to cool the market with tougher mortgage requirements. New home prices in 70 cities rose 0.41% last month from May, when they gained 0.52%, National Bureau of Statistics figures showed.

Several banks in Shanghai raised mortgage rates Saturday for first-home buyers from 4.65% to 5%, and the rate for second-home buyers from 5.25% to 5.7%.

Some banks even halted offering loans to homebuyers since May as regulators tightened lenders’ real estate exposure, according to Beike Research Institute.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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