October 20 -- The chairman of the China Banking Regulatory Commission (CBRC), Liu Mingkang, said yesterday that the results of the latest stress tests showed that the domestic banking industry can cope with a 40 percent drop in home prices, reports China Business News.

Liu said the balance of local government debts totaled 10.7 trillion yuan through the end of 2010. Of the total, bank borrowings accounted for 80 percent.

Through the end of August, the balance of financial institutions’ real estate loans totaled 10.4 trillion yuan, accounted for 19.8 percent of total loans.

China’s public debt-to-GDP ratio is currently at 50 percent, below the international warning line of 60 percent.

Loans extended to property developers had an average collateral ratio of 189 percent, above the international standard of 110 percent.

Liu said the CBRC will closely monitor the risks arising from the shadow banking and private lending sectors, and will support the development of micro and small businesses and agricultural businesses.

Shares of Bank of Communications (601328) fell 1.54 percent to close at 4.47 yuan today.

Source:CapitalVue