Banking Regulator Eyes Overlooked Trust Product
China’s banking regulator has decided to extend its oversight to a so-far overlooked type of trust product in an attempt to further clamp down on financial risks stemming from the business that banks and trusts do together, the regulator announced Friday.
The bid to bring what are called “property trust products” into the regulatory fold underscores the China Banking Regulatory Commission’s (CBRC) determination to tighten its grip on the two biggest financial sectors in China.
For a long time now, China’s banks and trusts have controlled the two largest amounts of assets in the financial sector. As of the end of September, China’s banking institutions managed 247 trillion yuan ($37.6 trillion) in assets, followed by trusts, which managed 24.4 trillion yuan in assets, according to data from the CBRC and the China Trustee Association.
Of the kinds of business that banks and trusts do together, the regulator has grown concerned about a common type called “channel lending,” in which banks take over management of trust products and bear the entire risk of potential losses. The trusts simply serve as a channel for the money.
Property trust products, in which banks entrust their existing assets or property rights to trust companies, can be used to facilitate channel financing. Channel financing or lending, is permitted under Chinese law, but the CBRC wants more stringent requirements on it.
In Friday’s announcement, the CBRC advised banks to beef up risk controls on the business they do with trusts and warned them not to bypass investment rules.
In one typical example of the business that banks and trusts do together, a bank collects money from its customers by selling them wealth-management products and then uses the money to invest in trusts, through which they can indirectly issue loans to companies.
The type of business has created an alternative financing channel for business restricted from borrowing directly from banks. In particular, local government financing vehicles and real estate projects have benefited from the arrangement.
In its announcement, the CBRC reiterated that funds collected by bank-trust products cannot be invested in real estate, government financing vehicles or the stock market “in an illegal way.”
Shortly after CBRC Chairman Guo Shuqing took up his post earlier this year, the regulator rolled out seven guidelines governing how banks do business, including their business with trusts. The guidelines aimed at cracking down on the shadow banking sector and specifically addressed channel business.
Contact reporter Lin Jinbing (email@example.com)
Jan 17 15:37
Jan 17 15:25
Jan 17 14:02
Jan 17 10:20
Jan 17 06:03
Jan 16 18:05
Jan 16 13:42
Jan 16 13:11
Jan 16 04:27
Jan 15 16:53
Jan 15 15:05
Jan 15 13:28
- 1In Depth: The Aftermath of the Killing of Qasem Soleimani
- 2Cash-Stuffed Secret Vault Appears in CCTV Documentary
- 3In Depth: China’s New Asset Management Rules Face Uncertainty
- 4Corrupt Chinese Official Pours Moutai Down the Drain
- 5JD.com Doubles Down on Smaller-Cities Expansion to Bolster 2020 Growth
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas