China's banking regulator is scrutinising property loan portfolios of some local and foreign lenders to assess systemic risks, sources with knowledge of the matter said, as a crisis in the real estate sector worsens and weighs heavily on the economy.
As part of their assessment, the China Banking and Insurance Regulatory Commission (CBIRC) is looking at banks' loan book exposure to developers to find out if those credit decisions were made according to the rules, one of the sources said.
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The aim is to measure risks to the financial system from the ongoing property sector turmoil in the world's second-largest economy, two of the sources said. It was not immediately clear what action the regulator might take after the investigation.
The probe is different to the routine self-reporting the regulator requires from banks, the sources said.
China's economy narrowly avoided contracting in the second quarter as widespread Covid-19 lockdowns and the slumping property sector badly damaged consumer and business confidence.
