Shanghai regulator said to order widest stress test on property

[Shanghai] The Shanghai branch of the China Banking Regulatory Commission asked local lenders to conduct their widest-ever stress tests on exposure to the real-estate industry, according to people familiar with the matter.

The CBRC for the first time required the tests to include all property-related industries and lending outside Shanghai, said the people, who asked not to be identified as they weren't authorized to speak publicly. Rapid increases in property loans and trust funding to places outside the city have concerned local regulators, they said.

The move reflects concern that credit risks may mount for lenders after their bad-loan ratio jumped the most in at least a decade in the fourth quarter. Lenders including Industrial & Commercial Bank of China Ltd. have sought to freeze assets of Shenzhen-based developer Kaisa Group Holdings Ltd., which missed bond and trust payments this month, people with knowledge of the matter have said.

The stress tests should cover both loans and other types of credit, including lending not recorded on lenders' balance sheets, the people said on Tuesday. Banks should continuously monitor exposure to big developers and lending outside Shanghai to prevent contagion across regions, they said.

Reuters earlier reported on the stress-test requirement. CBRC's Shanghai-based press officer declined to comment.

China's new-home sales slumped 8 per cent last year amid tight credit and an economic slowdown, forcing homebuilders to cut prices to sustain cash flows.

Shenzhen's land authority blocked transactions at some Kaisa projects in the southern city as the government investigates the developer over alleged links to a local official involved in an anti-graft probe, according to people with knowledge of the matter.

BLOOMBERG