China Tries to Rein In 'Barbarian Growth' of Shadow Banking

(Beijing) — China is stepping up efforts to rein in shadow banking loans with a draft policy that is the most ambitious attempt in years by regulators to revamp how banks calculate and report the risk of their investments and services.

The policy focuses on banks' off-balance-sheet business, such as lending to enterprises through an intermediary, which can make the loan look like a low-risk investment to another financial institution. Such maneuvers, unlike regular loans, normally don't increase the bank's balance sheet, but nevertheless pose a risk to its assets.