A recent investigation by the China Banking Regulatory
Commission (CBRC) has stunned the financial world as it revealed
that major Chinese banks have been providing real estate developers
with billions in illegal loans.
According to a CBRC document, banks had issued several billion
yuan in bogus mortgages by the end of June 2006 whilst being fully
aware that the borrowers had lied about salient details, such as
which homes they were buying and the size of registered capital.
Cases were also found where more than one mortgage was issued for a
single home.
The regulator conducted nationwide checks on loans both for real
estate development projects and for individual home buyers, which
were extended by some branches of major commercial banks.
It found that one unnamed state-owned commercial bank had issued
4,718 bogus mortgage loans, for a total of 1.31 billion yuan
(US$169 million), forming a staggering?6 percent of all home
buyer loans that were checked.
Another state-owned commercial bank granted 3,716 loans, valued
at 734 million yuan (US$94.7 million), for individual homebuyers,
3.23 percent of the total credits investigated.
Sources with the CBRC revealed the true scale of the scandal,
saying that close to 30 percent of all loans checked were being
considered as suspect.
An immediate order was placed for all state-owned and
joint-stock banks to intensify their scrutiny of real estate
projects and clamp down on illegal borrowing.
Several bogus mortgage cases have been exposed in China over the
past few years, including a 1-billion yuan (US$129
million)?case at the China Construction Bank in Guangzhou and
a 645-million yuan (US$83.2 million)?case at the Bank of China
in Beijing. But given CBRC's recent findings, these were only the
tip of the iceberg.
The document also banned any credit being given to real estate
developers with inadequate capital and outright forbad any loans to
be granted for property development purposes in the name of
circulating funds.
(Xinhua News Agency February 9, 2007)