Banking Regulator Will Crackdown on Use of Consumer Loans for Home Purchases

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The China Banking Regulatory Commission is planning a crackdown on the illicit use of consumer loans to invest in the property market.

As property lending has tightened in response to the central government’s regulatory constraints, an increasing number of homebuyers are making illicit use of personal consumer loans or business loans to invest in real estate or finance the down payments on homes.

The prevalence of the problem has already prompted local regulators in Beijing, Jiangsu province and Shenzhen to launch crackdowns within their own jurisdictions.

The central government’s banking regulator has just declared that it too will turn its attention to the problem, with CBRC officials telling the central bank’s flagship news publication that it will “make the inflow of consumer loans into the property sector a focal point for supervision and investigation, and expand the strength accountability for conduct in breach of regulations.”

CBRC officials revealed that its branches in areas including Beijing, Guangdong, Guangxi, Guizhou and Shanghai will make haste to conduct thorough inspections of how consumer loans are employed.

The Beijing CBRC will focus on suspect lending where borrowers or their spouses take out multiple loans within a brief period of time and make rapid repayments, while the Guangxi CBRC will require reports on loans in excess of 500,000 yuan, and collateralised loans of over 1 million yuan.

CBRC will also prompt its regional agencies to issue new policies for restricting or better regulating local  lending, in areas including Fujian, Guangxi, Inner Mongolia, Jiangsu and Shenzhen.

The Guangdong province CBRC has already stipulated that banks no longer provide personal consumer loans for amounts of over 1 million yuan or terms in excess of ten years, while Fujian province has reduced the maximum sum for consumer loans products that can be withdrawn at the discretion of borrowers from 300,000 yuan to 200,000 yuan.

A final measure adopted by CBRC will strengthen accountability, with its local agencies in Chongqing, Jiangsu, Fujian and Shanghai dispensing fines for the use of consumer loans to make down payments for home purchases.

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