PBOC to mon­i­tor wealth man­age­ment prod­ucts

China Daily (USA) - - BUSINESS - By BLOOMBERG

China’s cen­tral bank is con­duct­ing a trial mon­i­tor­ing of banks’ off-bal­ance-sheet wealth-man­age­ment prod­ucts un­der its macro-pru­den­tial as­sess­ment sys­tem,bank­ing sources said.

The WMPs will be in­cluded in cal­cu­lat­ing broad-based credit, the sources said, ask­ing not to be iden­ti­fied dis­cussing non-pub­lic in­for­ma­tion.

Cur­rently, the prod­ucts aren’t in­cluded in the as­sess­ment frame­work, and it’s not clear when or if the Peo­ple’s Bank of China will add them, the sources said.

Cit­i­group Inc es­ti­mated that 13 tril­lion yuan ($1.9 tril­lion) of the prod­ucts, which are a key build­ing block in China’s shadow-bank­ing sys­tem, could be cov­ered.

Ex­tra scru­tiny could cool growth in the prod­ucts as China tries to rein in fi­nan­cial risks that could tank the econ­omy.

Adding the prod­ucts to the cen­tral bank’s cal­cu­la­tions could help to em­pha­size re­quire­ments for lenders to limit dan­gers and main­tain suf­fi­cient cap­i­tal.

A change would mean reg­u­la­tors would be bet­ter able to “con­trol the pace of broad­based credit sup­ply,” Judy Zhang, a Hong Kong-based an­a­lyst at Cit­i­group, said in a note. WMP is­suance and yields may shrink as lenders pass on ex­tra costs to in­vestors, she said.

The cen­tral bank’s sys­tem en­com­passes banks’ macro­pru­den­tial al­ready loans, bond and eq­uity in­vest­ments, re­pur­chase agree­ments and place­ments with other fi­nan­cial in­sti­tu­tions when cal­cu­lat­ing lenders’ over­all lev­els of credit. The cen­tral bank didn’t im­me­di­ately re­ply to a fax seek­ing comment.

The sys­tem as­sesses in­di­vid­ual banks’ risks, look­ing at fac­tors such as cap­i­tal ad­e­quacy, broad-based credit growth, lever­age and as­set qual­ity.

Chi­nese house­holds, com­pa­nies and banks held a record 26.3 tril­lion yuan of wealth-man­age­ment prod­ucts as of June 30 and the China Bank­ing Reg­u­la­tory Com­mis­sion has been tight­en­ing rules onWMPs since late 2014.

Most of the prod­ucts are non-prin­ci­pal guar­an­teed, which means they re­side off banks’ bal­ance sheets.

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