CBIRC Ministry of Housing and Urban-Rural Development and People’s Bank of China Jointly Issue the Notice on Relevant Work of Commercial Banks Issuing Letter of Guarantee for Property Developers to Access Escrowed Pre-sale Funds
In order to support quality property developers to make rational use of escrowed pre-sale funds, prevent and mitigate the liquidity risk of property developers, and promote the stable and healthy development of the property market, China Banking and Insurance Regulatory Commission (CBIRC), the Ministry of Housing and Urban-Rural Development and the People's Bank of China (PBC) jointly issued the Notice on Relevant Work of Commercial Banks Issuing Letter of Guarantee for Property Developers to Access Escrowed Pre-sale Funds (hereinafter referred to as the “Notice”), which guides commercial banks to, on the market-based and law-based principles, issue letters of guarantee for quality property developers to swap for the escrowed pre-sale funds.
The Notice points out that, after the funds accrued in the escrow account reach the required fund limit required for completion and delivery of a project as stipulated by the Ministry of Housing and Urban-Rural Development, a property developer may apply to a commercial bank for a letter of guarantee to access the funds within the limit. Commercial banks may, with independent decision-making based on full assessment of the credit risk, financial status and reputational risk of property developers in accordance with the market-based and law-based principles, issue letters of guarantee to quality property developers so they can access the pre-sale funds in escrow accounts.
The promulgation and implementation of the Notice will help ease liquidity pressure of quality property developers, stabilize market expectations and promote the stable and healthy development of the property market. Next, China Banking and Insurance Regulatory Commission, the Ministry of Housing and Urban-Rural Development and the People's Bank of China will collaborate closely to jointly implement the Notice, and guide commercial banks to carry out the business in compliance with the law.
Appendix:
Notice by the General office of China Banking and Insurance Regulatory Commission, the General Office of Ministry of Housing and Urban-Rural Development and the General Office of People’s Bank of China on Commercial Banks Issuing Letters of Guarantee for Accessing Escrowed Pre-sale Funds
http://www.cbirc.gov.cn/en/view/pages/ItemDetail.html?docId=1082765
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