Regulator warns banks over surges in loans

By Wang Yanlin  |   2009-6-25  |     NEWSPAPER EDITION

CHINA'S banking regulator has demanded banks avoid sudden loan surges at the end of each month and each quarter and to make sure the money is channeled to sectors that help boost the economy.

It also reinforced an earlier decision that banks can't lend for investment in stock and property.

Banks should strengthen control over lending, especially at the month-end and quarter-end, which usually sees a rise to meet internal targets, the China Banking Regulatory Commission was quoted by the Shanghai Securities News yesterday as saying.

New yuan loans in China rose last month to 664.5 billion yuan (US$97.3 billion), up from 591.8 billion yuan in April.

Banks in China extended a new yuan credit of 5.84 trillion yuan in the first five months this year, more than last year's total and more than the minimum target of 5 trillion yuan for this year.

The regulator said the loans had to cater for demand in the real economy, instead of investing in stock and property markets.

It also discouraged banks from lending to companies that simply keep the money in higher-yielding certificates of deposit.