China Asked Some Banks to Limit Lending, Regulator Liu Says

an. 20 (Bloomberg) -- Chinese regulators asked some of the nation’s banks to limit lending after they failed to meet requirements including those for capital, said Liu Mingkang, chairman of the China Banking Regulatory Commission.

The CBRC hasn’t asked all Chinese banks to halt lending, Liu said in an interview in Hong Kong today. He didn’t identify which banks were told to limit loans.

“We have a number of regulatory requirements to ensure prudent supervision,” Liu said. “For those that failed to meet these standards, we told them to limit lending.”

Premier Wen Jiabao yesterday said China will “well manage” the pace of credit growth after banks extended a record 9.59 trillion yuan ($1.4 trillion) in new loans last year to help finance the nation’s 4 trillion yuan stimulus package, stoking concerns of asset bubbles and worsening credit quality. China last week raised the proportion of deposits banks must set aside as reserves for the first time in 18 months.

Chinese regulators track more than 10 indicators for the nation’s banks, Liu said today. “If you fail one of them, your loan expansion will be limited. That said, financing for good existing projects will be guaranteed.”

Major Chinese commercial banks received verbal orders from authorities to halt new lending in the remainder of January, the China Securities Journal reported today, citing unidentified people in Beijing and Shanghai. New bank lending in January may have already exceeded 1 trillion yuan to date, the Beijing-based newspaper reported, citing unidentified analysts.

Reserve Requirements

The Industrial & Commercial Bank of China Ltd., the Bank of China and other lenders have effectively stopped granting new loans after the banking system extended about 1.5 trillion yuan in new credit during the first two weeks of this month, Market News International reported, citing industry and government sources it didn’t identify.

The People’s Bank of China may ask different lenders to set aside differing percentages of deposits as reserves, depending mainly on their lending performance in January, the 21st Century Business Herald reported today, citing an unidentified executive at a commercial bank. China’s central bank may institute the measure as a way to slow loan growth, the newspaper reported.

The central bank on Jan. 12 unexpectedly raised the reserve requirements to cool the world’s fastest-growing major economy. The ratio for big banks was raised Jan. 18 by 50 basis points to 16 percent.

Liu’s commission on Jan. 18 said banks’ lending plans are determined by their company boards, denying an Apple Daily report in Hong Kong that Bank of China was told to cut new lending to no more than 650 billion yuan this year.

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china is slowly closing down on the real estate price frenzy, it's bad for property owners but overall a good move for the country. As i believe they are taking action at a very early stage before a bubble could be formed, to stablize the market.

in comparison, at this point during the us market i believe greenspan was still lowering the rates and banks handing out zero down mortgages.