China’s central bank and top banking regulator issued a new bank loan management mechanism Thursday to cap banks’ lending to the real estate sector in their latest effort to prevent systemic risks.
For the top 4 banks, the ratio of outstanding property loans to total loans will be capped at 40% and outstanding mortgages as a proportion of total loans will be capped at 32.5%.
For Tier 2 banks, the two ratios are 27.5% and 20%
For smaller city and rural commercial banks, rural cooperative banks, and credit cooperatives, the two ratios are capped at 22.5% and 17.5%.
These rules will come into force today with a period of grace for the application. This is the second important step issued by Chinese regulators after the “three red-lines” introduced last August.
As mentioned in my Outlook 2021, the next decade could be favorable for China, but the country needs to assess the real estate sector. This sector is clearly the collateral of its GDP Growth (details in my outlook),
