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China Cracks Down On Banks’ Risky Lending Practices

China

Chinese officials have reportedly taken measures to monitor and potentially crack down on the nation’s banks’ risky lending practices, reports in Reuters said Wednesday (April 25).

Two unnamed sources told the publication that the nation’s financial regulator, the China Banking and Insurance Regulatory Commission (CBIRC), has deployed teams from local branches to commercial banks. Officials will stay at those branches and monitor how loans are assessed, reports noted.

The CBIRC will first focus on consumer and real estate lending practices and emphasize its oversight in areas in which household debt is particularly high, the sources said. Credit cards and home-backed loans will be analyzed, while officials are also reportedly looking into how banks monitor whether credit is illicitly used to repay mortgages.

The CBIRC did not respond to requests for comment by Reuters, the publication said. Chairman Guo Shuqing previously raised the issue of household debt, noting it as one of the government’s top priorities. Yi Gang, head of China’s central bank, also highlighted rising household debt levels.

The China Banking Regulatory Commission (CBRC), which merged with the nation’s insurance regulator last month to become the China Banking and Insurance Regulatory Commission, had previously launched several efforts to address risk in the nation’s financial services sector. The CBRC said it would focus on shadow banking, bad loans, corporate governance and other key issues at banks exposing the nation’s markets to risks, reports said.

“Banking shareholder management, corporate governance and risk control mechanisms are still relatively weak, and root causes creating market chaos have not fundamentally changed,” the CBRC said in January. “Bringing the banking sector under control will be long-term, arduous and complex.”

Last year, Industrial and Commercial Bank of China Chairman Yi Huiman warned the industry against the threat posed by shadow banking.

“We have to focus,” he told The New York Times last year. “If not, the real economy will suffer.”

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