Bank Regulator: Falling Land and House Prices Will Cap Lending, Increase Debt Risk for Local Govt

Or down land prices may lead to local debt risk lending platform.

Zhengbao reporter was informed that the recent banking regulators warned agencies, local government financing platform debt risk overall control, but there are also some potential risks, one of which is partially due to local land prices, house prices fall, a large debt pressure.

Supervision department, said the scale of local government financing platform debt continues to increase, the risk of a complex structure tends to be one of the main risks and challenges currently facing the banking industry.

Potential risks mainly in three aspects:

One of hazards, local governments bear the responsibility to repay the debt is growing rapidly. Allegedly, since 2011, city and county levels of government bear the responsibility to repay the debt balance of 20% annual growth, which the county average annual growth rate of 26.6%.

Risks of the two, some local finance violations, illegal use of funds of government debt is still outstanding.

The third risk, the greater part of the local debt pressure. Because the platform depends on the solvency of non-operating sources of cash flow and land, partly because local land prices, house prices fall, a marked decline in revenue growth, some of the Midwest platform, low-level platform to face greater pressure to repay debt.

According to reports, in some areas, by the new-old phenomenon has been more common. But it is worth attention is that there are still some banking financial institutions a clear understanding of the platform debt risk, underestimate the size of local government debt, overvalued local government solvency, blind to provide financing.

"Adhere to short-term measures and long-term mechanism to deal with the combination of sustained-release local government financing platform debt risk" is the next phase of the banking regulators requirements.

Asked one: control credit aggregates. Regulators require each line to strict standards for admittance of new loans, new loans shall platform. Improve the financing of local government financing platform full aperture banking statistics to realize the financing and financing platform for credit and non-credit financing table monitoring.

Requirements II: resolving the maturity risk. For platform loans due this year, requiring all banks and financial institutions to finance platform, the local government to formulate a detailed repayment plan to gradually clear the repayment date, the repayment amount and source of repayment, and do a good job tracking implemented.

Regulators also asked to closely follow the lines of local government financing platform repayment schedule and the operational status of maturing debt, funding can not be implemented according to plan, could result in the repayment of default, should take immediate steps to promptly dispose of, and report to the regulatory authorities.

Three requirements: to optimize the loan structure. Loans accounted for some of the higher platforms, financial solvency and repayment willingness weak high-risk areas, as well as weaker earnings, the higher the risk of platform project, regulators require banks to strengthen consultations with the platform, increasing the effective mortgage assets and, where appropriate intensify efforts to clear the loan closing, the progressive realization of the credit to quit.

Requirements Four: establishment of early warning system. Regulators demanded a good calculation method of local government debt ratio, debt ratio, debt ratio and other indicators, the establishment of local government financing platform debt risk rating warning system, the local government financing platform as the specific customers for specialized credit rating and risk classification, Science debt risk set platform "cordon."

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