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Thursday, 21 May 2009
Mainland tightens rules to stop misuse of loans
Mainland’s banking regulator is tightening rules to prevent the embezzlement of bank loans after a huge burst of lending was unleashed to support the economy, domestic media reported on Wednesday.
Mainland’s banking regulator is tightening rules to prevent the embezzlement of bank loans after a huge burst of lending was unleashed to support the economy, domestic media reported on Wednesday.
The China Banking Regulatory Commission will require banks to temporarily hold in escrow any loan bigger than 5 million yuan (HK$5.68 million) or exceeding 5 per cent of the overall investment, instead of directly giving them to the applicants, the official Shanghai Securities News reported.
Once the borrower has worked out contracts or agreements for the funds, the bank will disburse the money to third parties.
The rule is intended to make it more difficult to misuse bank loans, it said.
Caijing magazine reported that an unnamed senior regulator told a recent internal meeting that new risks were mounting in the banking system because of the wave of big investment projects initiated by local governments.
Mainland banks lent a record 5.17 trillion yuan in the first four months of this year, more than Beijing’s minimum target of 5 trillion yuan for the whole of the year. Fixed-asset investment growth in urban areas shot up 30.5 per cent in the first four months, the fastest rate in nearly three years.
Although officials have welcomed the loan surge as vital for boosting the economy, there have also been signs that they are increasingly uncomfortable with how some of the money has been used.
The National Audit Office said on Monday that some companies had used fake documentation to obtain low-rate discounted bill financing from banks and redeposited the money at a higher interest rate, which had affected support for the real economy and bloated bank loans and deposits.
The National Audit Office said local governments had stumped up only 48 per cent of their share of funding in some cases, as part of Beijing’s 4 trillion yuan stimulus package.
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Mainland tightens rules to stop misuse of loans
Reuters in Beijing
20 May 2009
Mainland’s banking regulator is tightening rules to prevent the embezzlement of bank loans after a huge burst of lending was unleashed to support the economy, domestic media reported on Wednesday.
The China Banking Regulatory Commission will require banks to temporarily hold in escrow any loan bigger than 5 million yuan (HK$5.68 million) or exceeding 5 per cent of the overall investment, instead of directly giving them to the applicants, the official Shanghai Securities News reported.
Once the borrower has worked out contracts or agreements for the funds, the bank will disburse the money to third parties.
The rule is intended to make it more difficult to misuse bank loans, it said.
Caijing magazine reported that an unnamed senior regulator told a recent internal meeting that new risks were mounting in the banking system because of the wave of big investment projects initiated by local governments.
Mainland banks lent a record 5.17 trillion yuan in the first four months of this year, more than Beijing’s minimum target of 5 trillion yuan for the whole of the year. Fixed-asset investment growth in urban areas shot up 30.5 per cent in the first four months, the fastest rate in nearly three years.
Although officials have welcomed the loan surge as vital for boosting the economy, there have also been signs that they are increasingly uncomfortable with how some of the money has been used.
The National Audit Office said on Monday that some companies had used fake documentation to obtain low-rate discounted bill financing from banks and redeposited the money at a higher interest rate, which had affected support for the real economy and bloated bank loans and deposits.
The National Audit Office said local governments had stumped up only 48 per cent of their share of funding in some cases, as part of Beijing’s 4 trillion yuan stimulus package.
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