Chinese banks to be punished for risky lending
Posted: 24 November 2009 1700 hrs

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BEIJING : China has stepped up its moves to curb banks lending massive amounts of money by issuing a rare warning it will restrict lenders' access and other operations if they do not meet risk requirements.

Banks that fail to comply will face "restrictions on market access, overseas investment, and outlets and business expansion," the China Banking Regulatory Commission (CBRC) said.

China's banking laws have set the capital adequacy ratio -- the amount of capital banks must hold against their risk -- at a minimum eight percent.

Lenders must also raise their loan-loss provisions to at least 150 percent of their bad loans by the end of the year, the CBRC said in a statement posted on its website late Monday.

Such provisions at China's commercial banks stood at 144.1 percent at the end of September, latest official data showed.

The published list of punishments banks may face was an unusual move, highlighting Beijing's rising concern that brisk loan activity could result in asset bubbles and a slew of bad loans.

New bank loans reached 7.4 trillion yuan (1.1 trillion dollars) in the first half of the year, as banks heeded the government's calls to pump money into the world's third largest economy.

The pace slowed after regulators told banks to rein in lending and step up risk management, while seasonal factors also played a role, economists said.

New loans dropped to 253.0 billion yuan in October, the lowest monthly level since the beginning of the year, official data showed.

- AFP /ls