China regulator warns banks of lending risks

BEIJING (Reuters) - China's top banking regulator warned banks against risks from a surge in lending and urged them to step up oversight, the official Financial News reported on Wednesday.

It was one of the strongest warnings to date by Liu Mingkang, chairman of the China Banking Regulatory Commission, who nearly two weeks ago said that Chinese banks had adequate coverage against a rise in possible bad loans.

Chinese banks extended 4.58 trillion yuan ($671 billion) in new loans in the first quarter, a record rise which eclipsed all forecasts and has aroused concerns that balance sheets could be weighed down by non-performing debt in coming years.

Liu told lenders during a trip to the eastern province of Anhui that banks must properly handle risk control and credit expansion.

"Under the current conditions, banks should pay more attention to possible risk accumulation amid their incentives to lend," he said.

He urged banks to better monitor risks after extending loans and also to help companies move up the manufacturing value chain.

($1=6.825 Yuan)

(Reporting by Langi Chiang and Simon Rabinovitch; Editing by Jonathan Hopfner)