Bank Data Cracks Down on Loaned Stock Speculation
Following the post-National Day rally and subsequent retreat in the A-share market, a group of speculators who used loans to invest in stocks have reaped the bitter consequences. Previously, there was a constant buzz in the market about "maximizing leverage" to enter the stock market, claiming that "one could reap substantial profits amidst the market's robust advance." However, investors who "take one wrong step" may also suffer severe losses.
According to the reporter's understanding, a wave of market activity before the National Day holiday led stock investors to have greater expectations for the future market. In order to seize this opportunity, investors tried to gather more funds to invest in the market for higher returns, and some even took risks by attempting to use loans for stock speculation, ignoring the rapidly changing market risks.
In fact, regulators had previously provided guidance to commercial banks, requiring financial institutions to strengthen internal controls and compliance management, strictly control leverage, and especially prohibit credit funds from entering the stock market in violation of regulations. Many banks, while issuing risk warnings, also initiated risk investigation work, including suspicious consumption and cash withdrawal behaviors. Banks have made it clear that they will pursue legal responsibility if loan funds are found to be lent to others or if the use of funds is changed.
Advertisement
Capital Shuffle
Less than a day after entering the market on October 8th, Xu Ming (a pseudonym) from Shenzhen suffered a loss of more than 40,000 yuan.
"Seeing that the market was still performing well after the National Day holiday (8th), I entered the pharmaceutical stocks of the ChiNext board before the close of the afternoon session, preparing to 'take a shot and then withdraw'. I never expected that the market would drop by 5 points at the opening on the 9th, and the decline exceeded 10% by the close," Xu Ming said, adding that he entered the market just as it was retracing, causing him significant losses.
He told the reporter that the stock trading funds this time amounted to 400,000 yuan, and he had already sold out before the market closed on the 9th. The stock market "one-day tour" resulted in a loss of more than 40,000 yuan, which was indeed very unfortunate. "I was also afraid that the market would continue to retrace and couldn't stop, so I had to withdraw first."
In addition to the loss of more than 40,000 yuan, what's worse is that the funds Xu Ming used for stock speculation this time came from a bank loan. The regulatory guidance and the bank's risk investigation made him concerned about the compliance of the loan. After seeking help from his parents, Xu Ming said he had filled the hole and had already repaid the loan in advance.
"Due to a decent monthly income, the ability to repay is there. At the end of last year, I had accumulated more than 600,000 yuan in my bank account, but I had no investment channels, so I repaid all the remaining mortgage loans with the cash, leaving me with little money. This time, using a loan for stock speculation was a last resort, thinking about seizing this opportunity," Xu Ming said, admitting that he had misjudged the market and that he had to pay the price for his impulsive behavior.
Since September 24th, the Chinese stock market has entered a significant upward mode before the National Day holiday. On September 30th, the transaction volume of the two markets exceeded 2.6 trillion yuan, and the Shanghai Composite Index returned to 3,300 points. A-share seems to have started a "bull market" trend, with nationwide stock investor enthusiasm soaring. During the entire National Day holiday, the number of "new stock investors" opening accounts and entering the market increased rapidly, and investors' confidence in the market's continued upward momentum was unprecedentedly high."The National Day holiday is a time for many stock investors to prepare 'ammunition,'" Xu Ming said, adding that due to the difficulty of raising a large sum of money in a short period, he thought of bank loans.
Xu Ming revealed to the reporter that he has a consumer loan limit of 200,000 yuan in two banks. With the help of friends, he successfully withdrew 400,000 yuan in loan funds through transfers and cash withdrawals. "Loan funds cannot directly enter the stock market; they can only be transferred to a third party and then cashed out to evade bank supervision."
Xu Ming stated: "It's not appropriate to use loans for stock trading; this is a lesson."
In fact, during the previous period of rising stock prices, the phenomenon of Xu Ming using loans for stock trading was not an isolated case. The reporter learned from industry insiders that the topic of loan-based stock trading is currently very popular in the market. Judging from the loan situation in banks, the number of customers applying for loans has increased significantly recently. Even during the National Day holiday, the bank system crashed due to increased business volume, forcing the bank's technical department to work overtime. "It's hard to say whether there are cases of loan-based stock trading among these loan customers," an industry insider said, adding that some people might be aware that loan-based stock trading is against regulations but cannot resist the temptation.
Risk Investigation
On October 8th, the State Financial Regulatory Administration conducted window guidance on commercial banks, requiring financial institutions to strengthen internal control and compliance management, strictly control leverage, and especially prohibit credit funds from illegally entering the stock market.
On the same day, several banks issued statements prohibiting credit funds from flowing into the real estate market, stock market, and other fields. For example, Heyuan Rural Commercial Bank announced that according to the relevant regulations of the national financial regulatory authorities on credit funds, credit funds must not illegally flow into the real estate market and must not be used for stocks, futures, financial derivatives, and other purposes prohibited by national laws, regulations, and rules. If customers illegally divert credit funds to the aforementioned fields, the loans will be recovered in advance upon discovery.
On October 9th, a customer manager of Postal Savings Bank of China (601658.SH) also posted a message on social media stating: "Personal credit consumer loan funds can only be used to pay for legal consumption expenditures of the borrower and their spouse, parents, and children. They must not be used for purchasing housing, production and operation, equity investment, or other purposes prohibited or restricted by laws and regulations. After the loan is disbursed, if we find during telephone follow-ups or post-loan inspections that you have lent the loan to others or changed the loan purpose without authorization, we will pursue the legal responsibility for misappropriating the loan."
A person from a joint-stock bank told the reporter: "To prevent credit funds from illegally entering the stock market, banks have increased the application of big data and conducted targeted investigations of suspicious consumption, transfers, or cash withdrawals during the rise of the stock market. At the same time, they will also conduct spot checks on the use of funds for some loan customers, requiring them to provide consumption proof or vouchers."
It is understood that according to regulatory requirements, many bank customer managers are currently frequently reminding customers of the risks of credit funds illegally entering the stock market. The reporter learned in the interview that banks have slightly different approaches to dealing with credit funds illegally entering the market. Some banks only emphasize that they will recover loans in advance according to the contract, some banks mention that they will recover credit limits, and some banks emphasize that they will report to credit agencies and pursue corresponding legal responsibilities.The aforementioned stockholding bank official stated that the bank's strict control over the improper entry of credit funds into the stock market is also a form of protection for its customers. The investment risks in the stock market are relatively high, and there is a high degree of uncertainty. If customers misappropriate credit funds intended for specific purposes to speculate in stocks, and suffer excessive losses, it may exceed their capacity to bear, leading to non-performing loans for the bank. "When loan funds are diverted for stock speculation, the bank's risk assessment of customers becomes inaccurate. In other words, the bank's risk evaluation and the measures established for the assessment become meaningless."
More importantly, the stockholding bank official believes that, "If the bank fails to manage the improper entry of credit funds into the stock market, and regulatory inspections discover this, the bank will also be implicated. This year, several banks and their branches have already been penalized for this reason."
According to incomplete statistics, in 2024, 14 banks have clearly received regulatory penalties for the improper flow of credit funds into the stock market, covering state-owned large banks, stockholding banks, city commercial banks, rural commercial banks, and rural banks. Among them, rural banks are the most numerous.
In addition, many of the regulatory penalties involve banks that have been penalized for inadequate loan management, misappropriation of credit funds, and loan funds entering restricted areas. Although the penalties do not explicitly state that credit funds have improperly entered the stock market, this possibility cannot be ruled out.
An analyst from a certain securities institution stated that the risk of personal consumer loans improperly entering the stock market is limited for individual banks. However, the greater risk lies in the multiple liabilities and over-indebtedness followed by stock speculation. For example, if a person only takes out a consumer loan of 200,000 yuan from one bank for stock speculation, and even if they lose half, the 100,000 yuan gap may still be repayable with the help of their salary or parents and relatives. However, if this person simultaneously takes out consumer loans from 4 to 5 banks, amplifying the funds to 1 million yuan or more, then a loss of half, exceeding 500,000 yuan, may be very difficult to fill.
"Compared to consumer loan funds for stock speculation, the risk of using misappropriated housing mortgage business loan funds for stock speculation is even greater. The amount of enterprise business loans is higher, and the misappropriation of funds also means higher risks," the analyst believes.
He also stated that "The stock market has risks, and investment requires caution" is not an empty phrase. Investors need to have a clear understanding of their capabilities, understand their own loss-bearing capacity, and not invest with a fluky mentality, blindly adding leverage. Otherwise, they may regret it.