The central bank on Friday met with 36 domestic lenders, asking them to comply with risk management requirements and refrain from cutthroat competition in mortgage operations.
The plea came after housing and construction lending continued to grow last quarter despite two waves of selective credit controls intended to cool the local property market.
The central bank said it has since January been inspecting mortgage operations and found that most lenders abide by risk management rules.
Photo: Tyrone Siu, Reuters
However, some lenders failed to exercise caution by offering interest rates that were below market average, it said.
“Banks must factor in funding costs, operating overhang, potential credit losses and other things when setting interest rates for real-estate property lending,” the central bank said in a statement released after the closed-door meeting.
The central bank has held several meetings over the past few months calling for self-restraint on the part of lenders, aiming to curb hikes in property prices caused by low interest rates and excessive liquidity after global central banks printed money to ease the effects of the COVID-19 pandemic.
Under-par interest rates are unfavorable for risk controls and pose a threat to the stability of the nation’s financial market, the central bank said, asking top executives at local banks to oversee internal pricing practices.
The central bank had earlier said it was displeased that local lenders’ housing and construction lending had not yet responded to credit tightening it introduced in December last year and March.
The central bank said that some officials have suggested more drastic steps to rein in the property market, while others believe more time is needed to judge the success of credit controls.
Central bank Governor Yang Chin-long (楊金龍) has told lawmakers that, if necessary, he might further tighten lending terms at the bank’s quarterly board meeting next month.
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