China tells trusts to check property credit: Report

Updated: 2010-11-19 10:04
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BEIJING - China's banking regulator has told trust companies to assess the risks posed by their property-related loans, in a fresh move to rein in the real estate market, two sources told Reuters on Thursday.

Earlier this year, the China Banking Regulatory Commission (CBRC) ran stress tests in the country's trust firms to see if they could withstand a downturn in the property sector.

Trust investment programs have been an important channel for Chinese banks to pump credit into property projects as Beijing tightens controls on bank lending.

The sources, who have direct knowledge of the matter, said the CBRC had issued a notice to all trust firms warning them of the risks posed by possible "property market adjustments".

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Local offices of the CBRC would ensure that funds raised through trust investment plans were used properly, they said.

Trust firms were ordered to correct irregular practices in lending to property projects, they added.

Trust products have become a popular way for banks facing credit restrictions to take loans off their balance sheets.

By repackaging the loans into equity- or fixed-income-linked products, trusts have been able to offer bank clients, typically rich individuals, much more attractive yields than are available on bank deposits.

Seeing the risks in expanding credit to property and infrastructure projects, the CBRC in July ordered trust companies to halt the launch of wealth-management products via banks.