BEIJING, Oct. 15 (Reuters) – The ripple effect of the China Evergrande Group’s debt problems on the banking system is controllable and the risk exposures of individual financial institutions are not significant, an official said on Friday. central bank.

Chinese authorities are urging Evergrande (3333.HK) to step up asset divestitures and project takeovers, Zou Lan, head of financial markets at the People’s Bank of China (PBOC), also said in a briefing.

Evergrande had blindly diversified and grown its business, Zou said.

Last month, as Evergande’s debt crisis escalated, the PBOC said it would protect the legitimate rights and interests of homebuyers.

In August, the central bank as well as the banking regulator said they had summoned Evergrande executives and asked them to properly manage its debt risks, and Zou’s comments on Friday were the central bank’s first public statement on the issue. developer since then.

The appetite of financial institutions for real estate companies has declined dramatically in response to the risks of some developers, leading to a significant decline in developer loans, he said.

“The risk exposure of individual financial institutions in Evergrande is not significant and the ripple effect for the financial sector is controllable,” he said.

Evergrande is expected to speed up asset divestitures and speed up the resumption of construction of the projects, and the authorities will provide financial support for the resumption of the projects, he said.

Some lenders have had “misunderstandings” about the central bank’s debt control policies, causing financial strains for some companies as some new projects cannot get loans even after companies have paid off existing loans. Zou said.

“This extreme short-term reaction is a normal market phenomenon,” he said.

Reporting by Kevin Huang, Cheng Leng, Kevin Yao; edited by John Stonestreet and Emelia Sithole-Matarise

Our Standards: Thomson Reuters Trust Principles.