SHANGHAI / BEIJING (Reuters) – Chinese regulators are asking banks to reduce their loan portfolios this year to guard against risks resulting from bubbles in domestic financial markets, people familiar with the matter said on Friday.
Banks, including foreign and state lenders, have received directives from the central bank in recent days telling them to restrict the overall amount of their loans this year, three bankers said on condition of anonymity.
The China Banking and Insurance Regulatory Commission (CBIRC) is also looking “seriously” into the misuse of commercial loans to individual borrowers for personal investment, two of them said, in violation of Chinese regulations.
“A large amount of money on behalf of business loans had poured into the real estate and stock markets during the pandemic last year,” one of the bankers said.
“Banks are scrambling to collect loans issued last year and will not extend these loans.”
The CBIRC and the People’s Bank of China, China’s central bank, did not immediately respond to requests for comment.
China dramatically boosted credit support to the economy in 2020 when the COVID-19 pandemic hit, but some people have spent the money buying properties and stocks, stoking bubbles in the markets, said. the sources.
Business loans should be used to cover operating costs such as rent and equipment purchases. The bank watchdog prohibits borrowers from using such loans on stocks and real estate purchases.
Loans to micro and small businesses from large commercial banks increased by 50% last year and are expected to increase by another 30% this year, according to the government report released on Friday. China has also asked banks to increase lending and lower interest rates to small businesses in 2020.
Guo Shuqing, head of the CBIRC, said on Tuesday he was “very worried” about the risks of bubbles bursting in foreign markets and highlighted the risks of bubbles as a central problem facing the Chinese real estate sector.
China’s blue-chip CSI300 index has so far lost more than 1% in March.
Reporting by Winni Zhou and Zhang Yan in Shanghai, and by Rong Ma and Ryan Woo in Beijing; Editing by Ana Nicolaci da Costa
