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China banks call back loans to satisfy regulators

Two of China's biggest banks aggressively called back loans in the second half of January to fall into line with the government's directive to slow lending, local media reported.

Regulators have also issued banks with strict lending quotas and begun demanding daily notification of loan volumes in order to avoid a start-of-year credit surge and keep lending flows more balanced over the coming months, media added.

Banks appeared to be mainly cutting back discounted bills, a form of short-term financing which swelled loan totals at the start of last year and did more to fuel stock and property market speculation than real investment activity.

Bank of China, the country's largest foreign exchange lender, made about 140 billion yuan ($20.5 billion) in new loans in January, 20 billion yuan less than it lent in the first half of the month, the 21st Century Business Herald said, citing unnamed sources.

Industrial and Commercial Bank of China, the world's largest bank by asset value, lent about 110 billion yuan in January, which the newspaper said was 50 billion yuan lower than its mid-month total.

“Many banks are calling back loans and have stopped offering new credit or selling commercial bills, trying to keep down their overall loan totals,” a banker was quoted by the newspaper as saying.

It added that the government had set a sector-wide ceiling of 2.4 trillion yuan in new loans for the first quarter. That would be about one-third of the full-year 7.5 trillion target, adhering to the pattern of front-loaded lending seen in previous years.

The China Banking Regulatory Commission (CBRC) denied last month that it was implementing bank-specific loan quotas, which have been used in the past to strictly guide lending.

Overall new yuan loans issued by Chinese banks fell to less than 1.1 trillion yuan as of Jan. 28 from 1.45 trillion yuan in the first 19 days of the month, after the central bank ordered lenders to recall some loans, according to the Caiing magazine website. (Reuters)