Shanghai's banking regulator has warned city lenders about the financial risks from mortgage lending, in what is being seen as an effort to tighten the supply of credit to the property sector following central government moves to slow the market.
The Shanghai Banking Regulatory Bureau said property-related loans made up one-third of total lending by domestic banks in Shanghai, though it gave no figure. Analysts warn a property market slowdown could generate more bad loans.
'Commercial banks should comprehensively consider the macro economy, market risk and operational management to appropriately set targets for property lending operations and assessment,' the bureau said.
The order followed last week's announcement by the State Council of six measures aimed at slowing overheating in the property market, including the use of credit policies.
Bankers said mortgage lending was already tight in Shanghai following calls last year to crack down on speculation. The Shanghai branch of the People's Bank of China recently said the volume of new mortgage loans fell by about 2.3 billion yuan in April from the same month last year, extending a nine-month declining trend.
As business has slowed, Shanghai banks have offered new products to maintain their mortgage business, including extending loans to individuals without guarantees from property developers, fixed-rate loans and multiple mortgages for a single property.