China deepens crackdown on shadow banking

SHANGHAI: China’s banking regulator this week launched emergency risk assessments of lenders’ new business practices, said sources, as Beijing deepens crackdown on shadow banking.

Guo Shuqing, new chairman of the China Banking Regulatory Commission, has vowed to clean up “chaos” in the banking system.

The latest investigation would probe how lenders were using proceeds from negotiable certificates of deposit, as well as their bond investments and outsourced investment businesses, said two sources.

“The watchdog is also looking into possible violations of lending and investing rules, for example, by banks that invest in stocks via wealth management schemes or lend to their own shareholders.”

China’s shadow banking sector has exploded over the past few years, reaching an estimated 64.5 trillion yuan (RM40.89 trillion) last year, according to Moody’s, as banks use trust firms, brokerages and fund houses to channel deposits into risky investments, skirting lending and capital rules. Reuters