China deep­ens crack­down on shadow bank­ing

New Straits Times - - Business / World -

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

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