Trading in Bank of China was suspended in Shanghai Tuesday pending a major announcement amid reports of massive subprime-related losses that suggest the crisis has spread to mainland China.

The suspension came after Hong Kong media reported China's third-largest bank could announce a significant writedown in 2007 on its 7.95 billion US dollars of investments in securities linked to US subprime mortgages.

"It is the largest subprime exposure in Asia. I don't know of any bigger exposure," Tang Yayun, a Shanghai-based analyst with Northeast Securities.

Senior banking regulators have warned Bank of China as well as Industrial and Commercial Bank of China and China Construction Bank would have to make provisions for all their subprime-linked assets, the Hong Kong media said.

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"It's only the tip of the iceberg," said Tang. "Chinese lenders are really inexperienced in investment in financial derivatives. To be frank, they are liable to be cheated by international investment banks."

Concerns about the fallout from the mortgage default crisis in the United States contributed to a steep plunge in Chinese share prices Tuesday, with the Shanghai Composite Index closing the day down 7.22 percent.

"Investor confidence was hit severely by the global slump. People are also worried that the US credit crisis may spread into other countries," said Zhang Gang, an analyst at Southwest Securities.

Bank of China stock has slumped since Monday on the newspaper report but the bank said Tuesday it was "not aware of any reasons for such movement" in a statement filed with the Hong Kong Stock Exchange.

The Shanghai Stock Exchange did not provide further details regarding Tuesday's suspension.

An official with the lender said only that it was reviewing its subprime investment portfolio and it was too early to talk about the financial results.

Hong Kong-listed shares of Bank of China fell 0.29 dollars (0.03 US cents) or 8.61 percent to 3.08 on Tuesday after losing 6.39 percent on Monday.

Shanghai-listed shares Bank of China tumbled 4.14 percent to 6.25 yuan (0.85 US cents) on Monday.

Meanwhile the Financial News, a central bank-associated newspaper, warned Chinese banks will see their non-performing loans increase due to the US subprime mortgage crisis and domestic economic cooling measures.

"The non-performing loan ratio in the banking industry and risks of volatility in the capital market are both rising," the paper reported, citing Zhong Wei, an economist with Beijing Normal University.

The non-performing loan ratio of 16 major commercial lenders fell to 6.7 percent at the end of 2007 from 7.5 percent a year earlier, according to the China Banking Regulatory Commission.