Written by The WallStreet Journal Wednesday, 13 January 2010 08:38
 
SHANGHAI (Dow Jones)--China has told banks to stop giving commissions to real-estate agents for introducing mortgage customers, on growing concerns that competition for borrowers has led to less stringent lending practices and surging property prices.
The guideline has been effective from Jan. 1, the China Banking Association said Wednesday. The association, which is under the directive of China's banking regulator, didn't specify whether banks that ignore the guideline would be penalized."High commissions paid by banks to real-estate agents have seriously disturbed the (financial and real-estate) markets and impacted banks' credit business," the association said in a statement.
Agents could receive commissions ranging from 1.2% to 1.5% of a home's value from banks, the state-run Shanghai Securities News reported, citing several agents.
The commissions paid by banks raised concerns among regulators, as banks often lowered lending rates or relaxed lending practices to secure individual mortgage loans, a lucrative sector for lenders, while real-estate agents helped borrowers forge mortgage documents to get higher commissions.
Individual mortgage loans soared last year, as the property sector boomed on supportive measures from the government, which included tax breaks, smaller down payment requirements and lower loan rates for first-time home buyers.
Prices in China's more affluent coastal areas were especially strong. In December, prices of new housing in Shanghai rose to an average of CNY20,187 (US$2,957) per square meter, up 8% from November, government data show.
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