No banking system in the world has exposure to property like Hong Kong. Where Thai banks struggle with defaults, their exposure is a mere 20 per cent. Banks here have a mind-blowing 40 per cent exposure. Watching runaway mortgage lending this year the Hong Kong Monetary Authority wants to impose discipline. It knows well enough the danger of letting lending get out of control. When senior figures like Hang Seng Bank chairman Sir Quo-wei Lee recommend tighter restrictions things are clearly serious. Bankers were aghast at suggestions - denied by the authority - that capital adequacy requirements for property lending be massively increased. Still, veiled threats against banks whose property lending exceeded 2.5 times their capital base were not before time. Industry representatives say there is no reason to fret about asset quality. Prices remain below early 1994 levels on an affordability basis, the 70 per cent loan-to-value ratio is deeply conservative and credit controls have remained generally tight. For now, maybe, but such lending cannot be sustained. The fiercer competition becomes the more likely it is that bad loans are made. With margins under pressure and new entrants taking market share local banks are sure to whinge. They could, of course, lend for something other than property. Now that would be revolutionary.