U.S. Markets open in 8 hrs 54 mins

China bank watchdog says property loan risk under control but steps up oversight

(Refiles to fix literal in headline)

BEIJING, May 30 (Reuters) - China's banking regulator said on Friday it was stepping up oversight to prevent risks from some failed property developers from spreading into the broader financial system, but said overall risk from property loans was controllable.

The China Banking Regulatory Commission (CBRC) also urged commercial banks to work out emergency plans to mitigate risks stemming from the property sector, in a bid to ease investors' worries that the cooling real estate market could fuel an increase in bad loans.

"The overall risk of loans to the property sector is under control, as the proportion of property loans in total bank lending is not very high," Wang Junshou, a deputy director at the general office of CBRC, told reporters at a news conference to present its annual report.

"We will strictly control property loan risks this year... and prevent the risk of capital chain breaks in some developers from spreading to others," the annual report said.

Chinese property developers are feeling the pinch from slowing property sales and climbing borrowing costs in recent months, with some smaller players reported funding difficulties or even cash chain breaks over the past months.

Official figures showed home price growth in China slowed to a near one-year low in April while property investment also lost steam in the first four months, fanning concerns of a further downturn in the sector, which has become a drag on the broader economy.

The annual report also reiterated that the regulator would continue to strengthen risk control on wealth management products, barring lenders from channeling depositors' money into an "asset pool", which is usually opaque and could create room for illegal operations.

The CBRC also pledged to explore "market-based solutions" to dispose of bad loans in the sectors plagued by overcapacities to fend off a build-up of non-performing assets, said the annual report, without elaborations.

(Reporting by Aileen Wang and Jonathan Standing; Editing by Paul Tait & Kim Coghill)