Published: Sunday, 19 Jul 2009 | 8:01 PM ET

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China's top banking regulator on Sunday warned of the risks from surging bank lending, singling out the dangers of unhealthy growth in the property market.

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"(We) must control the risk of real estate loans," said Liu Mingkang, the head of the China Banking Regulatory Commission, adding that measures must be taken to better evaluate the creditworthiness of borrowers.

Liu said bank lending had helped stabilize the economy so far but made one of his strongest calls yet to banks to guard against taking excessive risks.

Photo by: Cory Doctorow Shanghai

"In the first half of the year, our country's banking loans expanded rapidly and helped play an important role in stabilizing the economy, but the loans growth has led to accumulated risks also increasing," he was quoted as saying in a statement on the China Banking Regulatory Commission website.

His warning comes after June's lending figures hit 1.53 trillion yuan (223.9 billion), higher than analyst expectations.

The figure pushed the accumulative first-half new yuan loans by Chinese banks to 7.37 trillian yuan ($1.1 trillion), far exceeding the government's 5 trillion yuan minimum target for the entire year.

The ballooning of loans has led to some concerns about a potential rebound in non-performing loans, though officials say banks remain sound with their leverage ratios well controlled.

Liu mentioned financial institutions in the banking sector being "not prudent and impulsive" with their lending which had spurred such risks.

He urged all banking and financial institutions to "strengthen risk management" to optimize their credit structures, abide by capital adequacy ratios and better manage liquidity.

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