Chinese Banks Ordered to Blacklist Six Property Firms
In a swift and stunning move, the Chinese government's watchdog on banking had issued an order to Shanghai based commercial banks to stop all transactions with six property firms. In a report from The National, the China Banking Regulatory Commission identified one of the six firms as Homelink Real Estate. Homelink, which operates in many major cities in China, provides local Chinese with the money to make investments overseas.
The order included a one month transaction ban on the banks. After the said period, the commission would then review should it be lifted or extended.
The government agency said it had discovered certain transactions made by commercial banks which were deemed illegal. This includes money transfers of mortgage loan account to third parties. These third parties were not part of the transaction for the properties and the funds taken out of these accounts were placed in the six real estate companies located in Shanghai.
The other real estate companies include Pacific Rehouse Co. and Shanghai Hanyu Property Brokerage Co. Also included in the order are seven local bank branches in Shanghai, namely Industrial and Commercial Bank of China, Bank of China Ltd and HSBC Holdings Plc. These financial institutions would have their personal mortgage business for two months for violations of current lending rules, according to a report from Bloomberg.
In a statement from China's Central Bank Governor Zhou Xiaochuan, he urged banks to conduct better review of individual creditworthiness for mortgage lending. These would result in lower risk and avoiding loans that would result in bad debts.
For its part, Homelink fully supports the move and would examine its practices. On the other hand, Pacific Rehouse and Shanghai Hanyu did not answer calls made to their offices. The banks did not issue a comment on the latest issues besetting them.