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BEIJING—China's banking regulator said Thursday that the stress tests it required on Chinese banks' property credit don't indicate the government's assessment of property-market trends or a possible change in loan policy, after property and bank shares dropped on news that lenders tested the possible impact of a plunge in real-estate prices.
Liu Mingkang of the China Banking Regulatory Commission in April.
The comments were intended to ease worries over the implications of stress tests among commercial banks on property credit. The benchmark Shanghai Composite Index ended down 0.7% at 2620.76 Thursday, led by property companies and banks.
The China Banking Regulatory Commission required commercial banks to conduct stress tests on their property credit to analyze the impact on the loan quality when China's average property prices drop by 10%, 20% and 30%, according to a question-and-answer statement posted on the commission's website.
"The stress test is one of the forward-looking risk management tools that commercial banks often use and is needed for commercial banks to increase their risk management level," the commission said in the statement.
The regulator reiterated that China will continue to strictly curb credit used for property speculation, in line with the country's central bank, which said Sunday that China will implement the tight credit policies for buying property that were adopted earlier this year.
The commission also reiterated that China will suspend credit for a household's third house in some areas where property prices are too high and price rises are too quick. It didn't name the areas, though some local reports said earlier Thursday that banks have halted credit for a household's third home purchase in big cities such as Beijing and Shanghai.
It also reiterated that the first payment of a household's third house and the credit rate in the other areas should be increased substantially.
The latest data show property prices in China fell on a month-to-month basis in June for the first time since February 2009, while gains on an annual basis continued to slow, indicating the beginning of a long-awaited turnaround for an overheated market. Analysts have said the data pointed to further weakness in prices and sales in coming months, but exactly how much both will fall remained hard to predict.
Prices in China's 70 largest and midsize cities declined 0.1% in June from May, reversing May's sequential 0.2% rise. Property prices rose year-to-year for the 13th straight month in June at 11.4%, slowing from May's 12.4% rise, in the second consecutive month of slowdown following April's 12.8% increase.
—Liu Li
Liu Mingkang of the China Banking Regulatory Commission in April.
The comments were intended to ease worries over the implications of stress tests among commercial banks on property credit. The benchmark Shanghai Composite Index ended down 0.7% at 2620.76 Thursday, led by property companies and banks.
The China Banking Regulatory Commission required commercial banks to conduct stress tests on their property credit to analyze the impact on the loan quality when China's average property prices drop by 10%, 20% and 30%, according to a question-and-answer statement posted on the commission's website.
"The stress test is one of the forward-looking risk management tools that commercial banks often use and is needed for commercial banks to increase their risk management level," the commission said in the statement.
The regulator reiterated that China will continue to strictly curb credit used for property speculation, in line with the country's central bank, which said Sunday that China will implement the tight credit policies for buying property that were adopted earlier this year.
The commission also reiterated that China will suspend credit for a household's third house in some areas where property prices are too high and price rises are too quick. It didn't name the areas, though some local reports said earlier Thursday that banks have halted credit for a household's third home purchase in big cities such as Beijing and Shanghai.
It also reiterated that the first payment of a household's third house and the credit rate in the other areas should be increased substantially.
The latest data show property prices in China fell on a month-to-month basis in June for the first time since February 2009, while gains on an annual basis continued to slow, indicating the beginning of a long-awaited turnaround for an overheated market. Analysts have said the data pointed to further weakness in prices and sales in coming months, but exactly how much both will fall remained hard to predict.
Prices in China's 70 largest and midsize cities declined 0.1% in June from May, reversing May's sequential 0.2% rise. Property prices rose year-to-year for the 13th straight month in June at 11.4%, slowing from May's 12.4% rise, in the second consecutive month of slowdown following April's 12.8% increase.
—Liu Li
