(Xinhua)
Updated: 2007-01-30 12:43

China's banking regulators have banned commercial banks from giving loans for stock investment and to investigate and call in all loans suspected of being used for such investment.

The China Banking Regulatory Commission (CBRC) would dispatch officials to examine loans at all commercial banks after the Spring Festival, which will fall on February 18, said an official with the China Banking Regulatory Commission, who declined to identified.

"The investigations will focus on property loans," the official was quoted as saying by Tuesday's China Securities Journal.

The bullish stock markets had driven more people to seek bank loans for investment under the pretence of a home purchase or decoration.

The CBRC ordered the banks to call in such loans as soon as they were found being invested in stocks, the official said.

Bank managers who approved such loans would be harshly penalized, but he would not elaborate on the penalties.

"The ban and investigations will help prevent investment bubbles developing on the stock markets," said Zuo Xiaolei, chief economist at Galaxy Securities.

Zuo said the loans also were considered high risk because they could be easily lost in the stock markets.

However, many bank officials acknowledged they had difficulty in tracking the loans if the clients took them out in cash.