China to tighten supervision of personal loans

BEIJING, Oct 28 - China's banking regulator on Wednesday said it would strengthen supervision of personal loans such as mortgages and car financing to prevent misuse.

It is the third time since July that the China Banking Regulatory Commission has vowed to step up oversight of loan use. The CBRC previously targeted loans for fixed-asset investment and for corporate working capital.

The moves came after Chinese banks pumped a record 7.4 trillion yuan ($1.1 trillion) of loans in the first half of the year, almost 25 percent of GDP, triggering concern that much of the money was flowing into the stock and property markets.

The pace of lending has slowed considerably in the second half, but worries persist that borrowers are using loans illegally and of an increased default risk for banks.

The CBRC said banks must provide loans directly to end-recipients or amounts exceeding 300,000 yuan to ensure that loans are put toward the use stated in the initial loan application and not routed to other channels. For example, a large mortgage could be given to the house seller rather than the buyer.

The new rules, still in draft form, would not change standards for loan approvals and growth of personal credit issued by banks should also remain unchanged, the CBRC said on its website (www.cbrc.gov.cn).

CBRC head Liu Mingkang said separately on Wednesday in a statement that the country's city-commercial banks, among the biggest issuers of loans in recent months, should not blindly pursue credit growth, but should instead aim for stable asset returns. ($1=6.828 Yuan)