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Financial regulator quashes property loan quota rumor

The Financial Supervisory Commission said yesterday it wasn't considering revising the property loan quota for banks, after a rumor prompted construction shares to gain 3.57 percent over the last two days.

The Chinese-language Commercial Times reported on Wednesday that the financial regulator might revise the quota in response to requests from banks and property developers.

But the commission said it would continue to regulate property loans in accordance with Article 72-2 of the Banking Act (銀行法).

The law stipulates that loans extended for residential and commercial properties may not exceed 30 percent of the aggregate of a bank's deposits and financial debentures.

The Commercial Times report said the commission might reinterpret the law to allow lenders to exclude revolving credit borrowed against property when calculating their loan quotas.

But the commission said that as most banks had extended property loans equal to only 19 percent or 20 percent of their total deposits and debentures, there was still ample room for growth.

The commission also said that it had amended the measures governing financial holding companies' re-investments in an effort to strengthen its supervisory power and enhance corporate governance.

The amendments require financial holding firms to detail their re-investment plans.

The regulator also scrapped an automatic approval mechanism for financial holding firms. From now on, these firms' re-investment plans will have to go through a 15-day screening process.
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