In the wake of the US subprime crisis, China Construction Bank, the country's biggest property lender, has warned commercial banks to guard against high default risks from individual mortgage loans.

The bank said in a recent report that it usually takes three to eight years for mortgage risks to be exposed, citing international lessons.

China's individual housing loan business was started in the 1990s and has been developing rapidly for many years.

Individual mortgage loans in three of the country's top banks, China Construction Bank, the Bank of China and the Industrial and Commercial Bank of China, rose from 1.1 trillion yuan at the end of 2005 to 1.17 trillion yuan by the end of 2006. In the same period, non-performing loans increased from 18.44 billion to 19.24 billion yuan.

Several interest rate hikes by the central bank in recent years may acerbate default risks, the report said.

Specifically, false mortgage loans to real estate developers and loans granted to unqualified applicants generate risks.

To fend off these kinds of risks, the report urged commercial banks to strengthen internal controls, create stricter application examinations and establish a complete personal credit information system. The report also called for an increase in the down payment ratio for second or more housing purchases and the development of mortgage-backed securities.

(China.org.cn by Yuan Fang September 20, 2007)