China Regulator Warns Lenders Over Personal Loan Abuses

China’s banking regulator asked lenders in the nation’s capital to tighten up risk management over personal loans after it found people were using the money to buy homes and stocks.

Some Beijing-based lenders have approved large amounts of borrowings with maturities that extend too long for typical personal loans, according to a notice posted today on the website of the China Banking Regulatory Commission. Loans for individuals were being used for purposes other than personal consumption such as stock investments and home purchases, according to the notice dated April 28, which was issued by the CBRC’s Beijing office.

Chinese lenders are experiencing slowing lending growth as the government discourages credit to overextended industries and local governments. A four-year campaign of real-estate controls has also made it more difficult for home buyers to obtain credit.

Banks should cap the maximum amount allowed for personal loans to 1 million yuan ($160,604) with a duration of no more than 10 years, the regulator said in the notice. Personal loan products must not be used to finance mortgage down payments, it said.

— With assistance by Aipeng Soo

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