PBC Notice Discusses Financial Support for Real Estate Markets
The People’s Bank of China (PBC), in collaboration with the China Banking and Insurance Regulatory Commission (CBIRC), published a notice regarding financial support for the real estate market. PBC also announced that it will cut the required reserve ratio (RRR) for financial institutions by 0.25 percentage points on December 5, 2022, except for some incorporated financial institutions that have already implemented an RRR of 5%. This RRR cut is intended to keep at an liquidity adequate level, improve the funding structure of financial institutions, expand their sources of long-term stable funding, enhance their capabilities to allocate funds, and support industries as well as micro small and medium-sized enterprises (MSMEs) that were severely affected by COVID-19.
The notice on financial support for the real estate market aims to provide a long-term mechanism for the smooth functioning of the real estate market, accommodate basic and improving housing demand through city-specific measures, ensure steady and orderly growth of real estate financing, and protect the legitimate rights and interests of housing consumers. As part of this notice, financial institutions are encouraged to:
- support sound development of well-governed and credible real estate firms focusing on property development business.
- implement differentiated credit policies suited to local circumstances, such as setting city-specific down payment ratios or mortgage rate floors, in order to meet basic and improving housing demand.
- lend to commercially-viable projects with manageable risks so that construction firms will have continuous and stable access to financing.
- extend or reschedule outstanding development loans and trust loans based on commercial negotiations with property developers while safeguarding creditors’ rights, with the aim of delivering delayed projects.
- support bond issuance by financially sound developers facing short-term difficulties.
- use trusts and other asset management products to meet reasonable financing needs in the housing sector.
- voluntarily provide additional finance for commercially viable projects, specifically those projects whose sales revenue could cover the cost of special loans and additional finance, or those projects that have well-defined lending and repayment arrangements.
- finance the mergers and acquisitions (M&A) of housing projects in a prudent and orderly manner, especially the M&A of projects by quality property developers from distressed developers.
- explore law-based and market-based approaches such as establishing funds to resolve the risks of distressed property developers, and thus supporting the completion of housing projects.
- negotiate with homebuyers on extending mortgage repayments in a market-oriented and law-based manner if their property purchasing contracts have been changed or canceled, or if they are under COVID-induced hospitalization, quarantine or unemployment.
- protect the credit records of homebuyers whose mortgage repayments are deferred.
- extend the grace period if the cap on real estate loans cannot be met.
- provide better credit support to rental housing companies that own rental property business, especially those companies that operate as independent legal entities with a clear-cut business scope, and are specialized in property investment and management.
- provide financing in a market-oriented and law-based manner to the development of rental properties through acquisitions and rebuilding of housing projects and issue financial bonds in support of rental properties.
Keywords: Asia Pacific, China, Banking, Real Estate, Required Reserve Ratio, Mortgage Lending, Lending, Credit Risk, Liquidity Risk, Basel, ALM, PBC, CBIRC
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
ECB Finds Banks Unprepared for Pillar 3 Climate Risk Disclosures
The European Central Bank (ECB) published results of the 2022 supervisory assessment of climate-related and environmental risk disclosures among significant institutions (103) and a selected number of less significant institutions (28).
NCUA Assesses Credit Union Exposure to Climate-Related Physical Risks
The National Credit Union Administration (NCUA) released a Research Note that examines the exposure of credit unions to climate-related physical risks. In a related development
EBA Issues Multiple Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) is seeking comments, until July 31, 2023, on the draft Guidelines on the proposed common approach to the resubmission of historical data under the EBA reporting framework.
EC Adopts Regulation on Own Funds, Issues Other Updates
The European Commission adopted Delegated Regulations on own funds and eligible liabilities, on requirements for the internal methodology under the internal default risk model
CDP Platform to Report Plastic-Related Impact, Issues Other Updates
The Carbon Disclosure Project (CDP) announced that its global environmental disclosure platform has enabled reporting on plastic-related impact for nearly 7,000 companies worldwide
IASB to Enhance Reporting of Climate Risks, Proposes IFRS 9 Amendments
The International Accounting Standards Board (IASB) updated its work plan to enhance the reporting of climate-related risks in the financial statements,
BIS Addresses Data Gaps and Macro-Prudential Policy for Climate Risks
The Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) published a brief paper that examines challenges associated with the use of macro-prudential policies to address climate-related financial risks.
FCA Sets Out Business Plan, Launches TechSprint on Greenwashing
The Financial Conduct Authority (FCA) published its business plan for 2023-24. The plan sets out details of the work planned for the next 12 months to achieve better outcomes for consumers and markets
UK Committee Sets Out Recommendations for Next Phase of Open Banking
The Joint Regulatory Oversight Committee (JROC), comprising the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) as co-chairs and the HM Treasury and the Competition and Markets Authority (CMA) as members
ECB Publishes Multiple Regulatory Updates for Banking Institutions
The European Central Bank (ECB) published the results of the 2022 climate risk stress test of the Eurosystem balance sheet,