Top Biz News

Regulator denies halt to bank lending

By Zhang Jiawei (chinadaily.com.cn)
Updated: 2010-01-20 15:15

China's main commercial banks on Jan 19 were told by their supervisors to stop new lending and bill financing for the rest of this month, the China Securities Journal said earlier today, citing bank sources from Shanghai and Beijing. But the country's top banking regulator denied the report.

The newspaper cited sources from the Bank of China as saying all the top branches of the bank had been required by headquarters to cease all bill financing businesses on Jan 17, and that when to resume bill financing would depend on the head office's notifications.

But Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), denied the report while he was attending a financial forum in Hong Kong. "I never said this," Liu was quoted saying by the website of the Economic Observer.

Liu said the CBRC has been controlling the pace of banks' new lending, and that the robust lending growth in January was not necessarily reflecting the market's real demands. But he said the CBRC had never required banks to cease lending for the remaining days of this month.

"We received our branch bank leader's oral notices on January 17 to control our sub-branches' scale of risk assets, and we are generally not allowed to grant new loans," the China Securities Journal cited a source from Bank of China as saying, adding that the bank's lending system had been shut down.

Another source from a joint stock bank said the banks involved included the four State-owned commercial banks and joint stock commercial banks. "The loans that have already been approved are expected to be granted to clients as planned, but those which have yet to be approved will also be postponed,"the newspaper quoted the source as saying.

But other sources said branches and sub-branches of banks which have been very cautious about lending since 2009 had not received any notification to cease lending.

"We can still meet our enterprise clients' demands for new loans, but bill financing business is generally stopped," said a source from a large State-owned commercial bank. The bank was only curbing new loans in some industries, especially those with overcapacity such as plate glass, steel and cement sectors, the source said.

New loans surged 600 billion yuan ($87.9 billion) in the first week of January, and banking analysts said new lending might already have surpassed 1 trillion yuan this year, which the newspaper said led to the regulator's further step of curbing excess cash in the financial system.

The move might not have affected the business of State-owned commercial banks with adequate capital, but could have a greater effect on smaller joint stock banks which have been plagued by a lack of capital since the second half of 2009 and reportedly already hurt by the central bank's recent deposit reserve requirement ratio hike.

"Now the head office is strictly controlling the corporate business, and we can only be approved to grant new loans when there is a free quota for the day," the newspaper said, quoting an unnamed source from a joint stock commercial bank.