China's top banking and insurance regulator said banks and insurers should join the wide-ranging efforts to promote timely delivery of presold homes.

Banks ought to be aware of any delayed delivery of presold homes, scientifically classify housing projects into different categories, take targeted measures, actively participate in the study of reasonable solutions to funding gaps for housing development projects, and help promote rapid resumption of work on the projects and timely delivery of presold homes, an unidentified official of the China Banking and Insurance Regulatory Commission told China Banking and Insurance News, a Beijing-based daily, on Sunday.

As of mid-July, some homebuyers in about 150 property projects in multiple cities issued statements saying they will refuse to make mortgage payments due to delayed delivery of their presold homes.

The regulatory official told the newspaper that banks should meet the personalized needs of individual clients and protect the legal rights and interests of financial consumers as per the law.

Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co Ltd, said: "Banks could provide some special purpose financing support to those housing projects that are under heavy stress to ensure timely delivery of presold homes. For homebuyers who have difficulty in repaying mortgage loans and suffer protracted delays in the delivery of presold homes, banks could allow them to defer principal and interest repayments."

Suspension of mortgage loan repayments by some homebuyers will have little impact on the asset quality of China's banking sector, given the small proportion of loans that could be affected in banks' overall mortgage loans. However, the authorities should pay close attention to this phenomenon and take measures to solve the problem, Dong said.

In addition to potential risks associated with homebuyer boycotts of mortgage payments, the CBIRC addressed the concerns of people who are worried about financial risks at some village and township banks.

The CBIRC official said in the newspaper interview that preliminary investigations conducted by public security organs found that Henan New Fortune Group manipulated five village banks in Henan and Anhui provinces to illegally absorb and occupy public funds and covered up illegal behaviors by cooking raw business data. Most of the five banks' off-the-books clients were unaware of suspected crimes committed by Henan New Fortune Group, nor did they receive extra high interest or subsidies.

Beginning Friday, advance payments have started to be made to clients with a combined amount of savings worth up to 50,000 yuan ($7,427) per person at a single institution among the five village banks. If the combined amount is more than 50,000 yuan, the advance payment will be made successively and the arrangement will be announced separately, according to the CBIRC.

"Small and midsize rural commercial banks are weaker than national joint-stock commercial banks in terms of the overall competitiveness. Their loan portfolio concentration risk is higher, and they are more easily affected by changes in economic conditions in local provinces and regions," said Yulia Wan, a senior analyst at Moody's Investors Service.

"Such banks are also weaker in the areas of corporate governance and risk management. Some shareholders have a huge influence on business operations of some banks," Wan said.

Despite the problems, the overall operations of small and midsize banks in China still remain stable, and the overall risk remains controllable, said Xiao Yuanqi, vice-chairman of the CBIRC, last month. During the past five years, small and midsize banks disposed of 5.3 trillion yuan of nonperforming loans.

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