CBRC warns lenders of joint loan risks

Shaky companies can drag down solvent ones, regulator says

The China Banking Regulatory Commission is strengthening its efforts to oversee joint-guarantee loans for fear risk will be transmitted from one company to another if the Chinese economy keeps slowing down, Reuters reported.

As it is hard for small and medium-sized enterprises to get loans from commercial banks in China for lack of collateral, some companies choose to form a mutual help group based on trust. If one of the companies applies for a bank loan, all members of the group are held jointly liable for the debt in accordance with the contract.