Beijing’s banking regulator and the Chinese central bank have announced that they will launch investigations into the widespread misuse of personal and consumer loans for the purpose of residential property investment.
On 5 September the Beijing branch of the China Banking Regulatory Commission and the People’s Bank of China Business Management Department jointly issued the “Notification on Undertaking Investigations into the Illicit Flow of Bank Personal Loan Funds into the Property Market (Jingyin Jianfa (2017 no. 153).”(北京银监局 人行营业管理部关于开展银行个人贷款资金违规进入房地产市场情况检查的通知).
The Notification requires that banking sector financial institutions within the greater Beijing metropolitan area undertake self-inspections that focus upon the illicit use of personal business and consumer loans to make residential property purchases.
Beijing CBRC and PBOC said that following the self-inspections by banks, regulators would conduct their own specialist investigations as well as perform strict handling of any problems uncovered.
The release of the Notification closely follows a Securities Daily news report claiming that real estate agents are teaming up with banks to provide loans for property down payments to prospective buyers, despite Chinese regulators banning the practice last year.
According to the report real estate agents encourage clients to lie to loan officers about how funds will actually be used, but that banks nonetheless remain complicit in the financing of the heavy down payments required for urban domiciles.
Speaking to CCTV, the Beijing CBRC said that the municipal banking sector has recently seen accelerating growth in personal business and consumer loans, and that this was reflected by shifts in the local market.
According to CBRC, however, some of the personal business and consumer loans made by Beijing banks have flowed into the real estate market and been used to make purchases of residential property in breach of violations, at a time when Chinese regulators are imposing heavy controls on the market in order to contain the growth of potential housing bubbles.