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Banking Regulator Warns of Loan Risks

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China should be cautious about possible risks in the financial system posed by the current rapid loan growth and a concentration of loans in certain industries and business, an official with the China's banking regulator said on Tuesday.

Wang Huaqing, disciplinary secretary of the China Banking Regulatory Commission said syndicated loans would be a good tool for banks to prevent risks caused by a concentration of credit.

"With new loans expanding fast in China, risks of the concentration of bank loans are becoming evident," he said. Bank loans concentrated in certain industries and businesses are subject to changes in the macro-economy and companies' performance, which would be likely to result in damage to the financial system, he added.

New yuan-denominated loans in the first five months had reached 5.84 trillion yuan (US$854.8 billion) to finance projects in the stimulus package unveiled in November of last year. The figure has far exceeded the full-year target of 5 trillion yuan.

In a notice dated May 31, banking regulators asked lenders to pay particular attention to the financial conditions of debtors and conduct better risk analysis before making loans, to ensure loan quality.

(Xinhua News Agency July 7, 2009)