China Tightens Screws on Lenders

From the Herald Sun:

The China Banking Regulatory Commission tightened rules on personal and working capital loans to bar them from being used for speculation.

Lenders shouldn’t “over-grant” the loans that companies use to finance goods and services and must reasonably calculate their “real demand,” the CBRC said in a statement. The rules are retrospective, and took effect on February 12.

The tightening reflects concerns that funds might have been diverted to stocks and property, raising the risk of asset bubbles and bad loans…The regulator will punish lenders that freely distribute working capital loans and companies that use those loans for purposes such as capital expenditure, stake investment and some other areas that the government doesn’t allow, CBRC said.

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