To better carryout the Notice on Strengthening Management of Commercial Real Estate Credit (PBCDocument [2007] No. 359)(hereinafter referred to as the Notice), andmaintain the seriousness and effectiveness of this policy, the People’s Bank ofChina (PBC) and China Banking Regulatory Commission (CBRC) jointly released theSupplementary Notice on Strengthening Management of Commercial Real EstateCredit (PBC Document [2007] No. 452) to clarify relevant regulations in theNotice on “Strengthening management of individual housing loans” afterconsulting with relevant government departments and some commercial banks, andjointly held a special conference on strengthening management of commercialreal estate credit in Beijing. Vice Chairman of the CBRC, Mr. Jiang Dingzhipresided over the conference. Deputy Governor Liu Shiyu of the PBC delivered aspeech and gave concrete requirements to implement the relevant policy.
Deputy GovernorLiu pointed out that, housing is one of the important issues concerning people’slivelihood in China. The State Council pays high attention onresolution of urban residential housing problem and takes the improvement ofpeople’s housing condition as the fundamental target in urban housing systemreform and development of the real estate industry. With sustained and rapideconomic development and deepening reform of the urban residential housingsystem, the real estate industry has already evolved as an important drivingforce in economic development, and real estate finance, dominated byresidential housing development finance and housing mortgage credit, has becomea significant product of commercial banks and achieved remarkable results.First, urban residents’ housing condition was improved; second, housingprotection system was advanced; third, real estate finance developed briskly;fourth, real estate financial product innovation achieved progress. With therapid development in real estate market and real estate finance, manydeep-rooted problems have emerged in the market including surging housingprices, distortion in housing supply structure, weak implementation ofadjustment policy and particular housing difficulties for low-income families,and etc. Moreover, excessively rapid growth of real estate credit, overcompetition and irregularities, especially some commercial banks’ conduct of remortgageand additional mortgage business without approval will increase risks in thereal estate credit and have drawn attention of relevant departments. From theexperiences of the real estate crises in the world, including the real estatebubbles in Japan and Hong Kong, especially the sup-prime mortgage crisis in the US, we could also learn some noticeable lessons.
Mr. Liu Shiyustressed that, the PBC and CBRC jointly issued the Notice on September27 to carry out the spirit of the national urban housing work conference andward off financial risks, requiring commercial banks to further strengthenmanagement of real estate credit. Since the release of the Notice, theadjustment effect has gradually emerged with positive comments from allrelevant parties in general. The PBC and CBRC jointly issued the SupplementaryNotice to clarify rules on the management of housing mortgage credit asthere were different understandings about the Notice.
Mr. Liu urged thatcommercial banks to further improve and strengthen management of commercialreal estate credit. The PBC, CBRC and their branch offices and commercial banksshould earnestly study and grasp the spirit of the 17th Plenum ofthe CPC Central Committee and the Central Economic Work Conference, follow thescientific development approach, implement a tight monetary policy and strengthenadjustment of real estate credit and risk management to promote real estatefinancial innovation and healthy development of the real estate financialmarket.
In his concludingremarks, Mr. Jiang Dingzhi stressed that, the release of policy on strengtheningmanagement of real estate credit was necessary to carry out the macro-economicadjustment policy as well as the intrinsic requirement of commercial banks tostrengthen their risk management. The PBC, the CBRC and their branch officesand commercial banks should earnestly carry out the spirit of the conference.First of all, efforts should be made to ward off real estate credit risks.Commercial banks should communicate the conference spirit to their branches,learn lessons from the US sub-prime mortgage crisis, enhanceanalysis of real estate market risks and strengthen the risk management of realestate credit. Second, commercial banks should stipulate their own bylaws oncommercial real estate credit at the level of each legal entity. The bylawsshould be in line with the Notice as well as operational, especially includingstipulations on borrowers’ information collection and credit examination, andstrict examination and verification measures on the authenticity of individualhousing information, income, family information provided by the borrower.Third, monitor and punishment of violating activities will be strengthened.Commercial banks should voluntarily correct their rules and practices that arenot in line with the Notice; the PBC and CBRC should severely examineand punish illegal practices such as mortgage cheating, additional mortgage andremortgage. Fourth, all banking institutions including foreign-funded banks,city commercial banks, rural commercial banks should be notified to ensure thatall involved financial institutions standardize the business in line with theunified policy.
Mr. Jiang Dingzhifinally called for great efforts to firmly carry out the macro-economicadjustment policy and further strengthen management of real estate creditguided by the scientific development philosophy so as to contribute to the goodand rapid economic development.
Responsiblepersons of the PBC Shanghai Head Office and branches, sub-branches, CBRC branchoffices, policy banks, state-owned commercial banks and joint-stock commercialbanks attended the special conference.
The SupplementaryNotice, released on December 5, clarified the following issues inparticular: first, the mortgage applicant is defined by family (including theapplicant, his or her spouse and their dependant children) rather than theapplicant alone. Second, a mortgage applicant, whose per capita acreage of thefamily’s first apartment is lower than local average level, could enjoy downpayment and preferential interest rates on their second housing mortgage loanthough he or she has already purchased the first residential apartment onmortgage. However, the applicant shall provide the family housing acreageinformation certified by local real estate administrative departments via thehousing information registration system. Other second housing mortgageapplicants should be treated in accordance with the relevant stipulations onsecond housing mortgage. Third, housing mortgage applicants whose first loanswere financed by housing provident funds should also be treated according tothe stipulations in the Notice. The Supplementary Notice emphasizedthat all commercial banks shall not accept any loan application with falseinformation or false certification.
