The China Banking Regulatory Commission (CBRC) will investigate
a sudden rash of consumer loans and other bank credit operations
that are thought to be fuelling speculation on the country's
red-hot stock markets.
Chinese authorities are concerned that stock market fever on the
mainland is transferring risks from capital market to banks. If
speculators borrow from banks to fund their stock market
operations, and then lose their money, the banks could face an
avalanche of non-performing loans.
He pointed out that there are many reports of people selling
houses to obtain funds for stock market speculation.
The CBRC is also concerned at the source of some of the funds
being used for speculative purposes.
"We will look into the source of funds that are entering the
market and also at how much money is involved," Monday's China
Securities News quoted Fan Wenzhong, deputy director of the
CBRC research institute, as saying.
According to the deputy director, there has been a sharp rise in
consumer loans and other credit operations recently.
Fan said that the CBRC will probe the increase and take
necessary measures. A risk warning system for banks is being
studied as well as regulations concerning the sources of fund used
for stock market speculation.
Nevertheless, the deputy director believes that much more must
be done before the country can be confident of being able to avoid
bubbles.
Fan said that the capital market and the banking industry are
closely tied and bank exposure to the capital markets is
potentially risky.
The CBRC issued a notice prohibiting the improper use of credit
in January.
Insiders said that residential loans would come first in a
comprehensive investigation nationwide after the Spring
Festival.
(Xinhua News Agency March 6, 2007)