China's banking watchdog yesterday halted all loans made to fixed-asset investment projects not approved by the government as authorities implement another round of curbs to cool the overheated economy.
The loan ban also includes projects which contravene government regulations, the China Banking Regulatory Commission (CBRC) said on its Web site.
"Banks must take proper measures to ensure repayment of the loans," the regulator said, adding they must try to minimize potential losses if they can secure immediate repayment.
The CBRC has also launched a probe into all loans for fixed-asset investment deals awarded before March this year and requiring capital of more than 30 million yuan (US$3.6 million).
In focus are loans to the aluminum and cement sectors, government buildings, expressway construction, golf courses, exhibition centers and logistics parks, it said.
The commission has also asked foreign banks to provide detailed information on clients that have obtained credit lines of over 100 million yuan as part of aims to make sure companies do not flout the rules.
Meanwhile, loans extended not only by the big commercial banks but also state development banks, city and rural commercial banks, credit cooperatives and even trust and investment companies will be under review.
The CBRC's statement comes after nearly a year of government measures meant to engineer a slowdown in the world's fastest expanding economy as fixed-asset investment has continued to soar, rising 42.8 percent in the first four months of this year.
Only two weeks ago authorities ordered that steel, non-ferrous metals, machinery, construction materials, petrochemicals, light industry, textiles, pharmaceuticals and publishing would all see new funds cut off.
At the same time the regulator has ordered senior executives of the country's 11 joint-stock banks to ensure they avoid lending to overinvested sectors and unauthorized projects.
The heads of the 11 banks were told to undertake "enhanced study of industrial development guidelines and lending policies to tighten loan risk management," a CBRC statement said.
China's joint-stock banks are not as experienced as state commercial banks in executing government macroeconomic policies and their research on state industrial development guidelines as well as lending instructions is insufficient, said Tang Shuangning, a vice-chairman of the commission.
"Blind growth in lending and irrational pursuit of market share still exist. Joint-stock banks must further tighten control over loan risk management," Tang said.
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