CBRC cau­tions on surg­ing consumer loans

China Daily (Hong Kong) - - BUSINESS - By JIANG XUEQING jiangx­ue­qing@ chi­nadaily.com.cn

China’s top bank­ing reg­u­la­tor on Fri­day warned surg­ing consumer loans may pose po­ten­tial risks to the coun­try’s lend­ing sys­tem.

It also cau­tioned against a fast rise in consumer lev­er­age ra­tio.

“Bank­ing regulators en­cour­age banks to de­velop consumer fi­nance but the busi­ness must be op­er­ated ac­cord­ing to high stan­dards,” said Xiao Yuanqi, chief of the Pru­den­tial Reg­u­la­tion Bureau of the China Bank­ing Reg­u­la­tory Com­mis­sion, at a news con­fer­ence.

“Banks should as­sess each consumer’s re­pay­ment abil­ity com­pre­hen­sively and au­then­ti­cally, and avoid push­ing up the consumer lev­er­age ra­tio, and be care­ful not to in­crease the risk of a bub­ble in cer­tain sec­tors such as real es­tate,” Xiao said.

“We should learn from the

lessons of the sub­prime mort­gage cri­sis in the United States.”

Re­cent in­spec­tions on banks by CBRC branches and the Peo­ple’s Bank of China, the cen­tral bank, have found that some consumer loans were used to make a down pay­ment for home pur­chases or as an in­vest­ment, rather than us­ing

them for travel, ed­u­ca­tion, home ren­o­va­tion or to buy consumer durables.

Such mis­use of consumer loans is tan­ta­mount to vi­o­la­tion of bank­ing reg­u­la­tions, he said.

To get the consumer fi­nance seg­ment back on track, banks must re­view consumer loans, track their us­age and ex­am­ine the re­pay­ment abil­ity of bor­row­ers, he said.

Lat­est half-yearly fi­nan­cial re­sults showed that many commercial lenders in China have made re­tail bank­ing a strat­egy to trans­form their busi­ness, due to a de­crease in high-qual­ity cor­po­rate bor­row­ers, a boom in the fintech sec­tor and tight­en­ing fi­nan­cial risk con­trols in the first half of this year.

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