Shadow banking main­tains a niche

China Daily (USA) - - BUSINESS -

China’s ef­forts to tame fi­nan­cial-sec­tor risks have slowed the over­all growth in banks’ shadow loans, though some of the coun­try’s mid­sized lenders are still push­ing rapidly into the sec­tor, ac­cord­ing to an anal­y­sis of their lat­est fil­ings.

So-called in­vest­ment re­ceiv­ables, or “debt se­cu­ri­ties clas­si­fied as re­ceiv­ables”, at 25 list­edChi­nese banks grewto 11 tril­lion yuan ($1.6 tril­lion) as of June 30, from 9.7 tril­lion yuan at the end of De­cem­ber, ac­cord­ing to first-half earn­ings state­ments re­leased so far. That cat­e­gory pro­vides the best in­sight into their shad­ow­bank­ing ex­po­sure.

The con­tin­ued growth sug­gests a lim­ited im­pact from reg­u­la­tions in­tro­duced in April by the China Banking Reg­u­la­tory Com­mis­sion to curb the shadow-lend­ing in­dus­try.

Banks is­sued a record 26.3 tril­lion yuan of wealth-man­age­ment prod­ucts to in­di­vid­u­als, com­pa­nies and other lenders as of June 30, China Banking Wealth Man­age­ment Reg­is­tra­tion Sys­tem data showed on Aug 31, un­der­scor­ing the ur­gency of the reg­u­la­tor’s at­tempt to re­duce risks in an in­creas­ingly lever­aged fi­nan­cial sys­tem.

Other than wealth-man­age­ment­prod­ucts, the in­vest­men­tre­ceiv­ables cat­e­gory in banks’ state­ments in­cludes as­set-man­age­ment plans and trust-ben­e­fi­ciary rights, all of which can be used by lenders to dis­guise what are in ef­fect loans. The in­ter­me­di­ary struc­tures of­fer a way to get around reg­u­la­tory curbs on lend­ing to riskier bor­row­ers — such as in­dus­tries with over­ca­pac­ity— by keep­ing the loans off their books.

The quasi-loan na­ture of some prod­ucts has the added ad­van­tage of re­duc­ing the banks’ need to set aside cap­i­tal and pro­vi­sions for loan losses.

Five out of the eight pub­licly traded mid-sized lenders saw in­creases in their in­vest­ment re­ceiv­ables dur­ing the sec­ond quar­ter of 2016, ac­cord­ing to their fil­ings. Mid-sized Chi­nese banks have been some of the most ag­gres­sive shad­ow­bank­ing lenders.

De­spite the gains in outstanding in­vest­ment re­ceiv­ables, the over­all rate of growth at the eight mid-sized banks has slowed. The re­ceiv­ables in­creased only 6 per­cent in the sec­ond quar­ter, well be­low the 26 per­cent rate in the same pe­riod a year ear­lier.

Among all listed banks that have reported first-half re­sults, the fastest growth in in­vest­ment re­ceiv­ables was seen at mid-sized lenderHuaxia Bank Co, where the cat­e­gory grew 124 per­cent. Next was China Min­sheng Banking Corp, where the re­ceiv­ables rose 77 per­cent, fol­lowed by Huis­hang Bank Corp, with a 56 per­cent in­crease.

Among the banks that dis­close the break­down of in­vest­ment re­ceiv­ables, the one with the largest ex­po­sure— Shang­hai Pudong De­vel­op­ment Bank —said 88 per­cent of those as­sets were trusts and as­set man­age­ment plans, with WMPs the next-largest cat­e­gory.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.