(Yicai Global) April 8 -- A total of 123 business and consumer loans worth CNY339 million (USD518 million) were found to have been misappropriated for use in Shanghai’s property market, the China Banking and Insurance Regulatory Commission announced yesterday.

The discovery was the result of an investigation the CBIRC’s Shanghai branch launched on March 1 into corporate and consumer loans illegally used as housing loans that were issued by 16 banks within its jurisdiction.

The cases included the use of personal and corporate business or consumer loans as payments or down payment for houses.

Also, some shell companies received more than one personal business loan and gave the money back to the borrowers to buy houses, and real estate firms illegally provided home buyers with down payments for houses.

Prodded by the CBIRC’s Shanghai arm, 135 commercial lenders in the city completed a self-examination of their personal housing credit loan management. They discovered problems such as loans used for illegal purposes, imprudent down payment verification, and incomplete collection of after-loan documents.

For borrowers who illegally obtain down payment funds and commit fraud, the CBIRC branch will now require banks to reject their mortgage applications and report them to the Shanghai Public Credit Information Service Platform. Banks will also be ordered to discipline errant employees via their internal accountability system.

The government currently takes punitive measures against dishonest persons, such as bans on taking flights or high-speed trains and restrictions on borrowing money for investment.

The CBIRC’s Shanghai branch has handed over documents on violations by microfinance, pawn, real estate and real estate brokerages in its investigation to local government departments to jointly crack down on irregularities in the real estate market.

Since the beginning of this year, Beijing, Guangzhou, and Shenzhen have taken aim at business loans being illegally used to buy property. They found that personal business loans of around CNY340 million, CNY147 million and CNY51.8 million, respectively, had been misused in the real estate market.

Editor: Peter Thomas