China Everbright Trust Suspended From Financing Trust Business
What’s new: Leading Chinese trust company China Everbright Trust was suspended from the financing trust business because its nonstandard credit business in the first half of 2020 exceeded a regulatory limit, Caixin learned from multiple sources.
Everbright Trust denied such a suspension, but some of its clients turned to other trust companies saying Everbright cannot fulfill its contracts, according to a Shanghai trust firm. In addition, Ever-bright applied to regulators Friday for a financing trust product but was turned down, a person close to the matter said.
The background: Financing trust business refers to lending entrusted funds to companies in need of capital by means of financing, such as loans or lease financing. It is a key part of trust companies’ nonstandard business. Compared with loans, bonds and other financing products, financing trust plans generally attract borrowers that have relatively low credit quality and higher default risk.
Over the past several years, regulators have taken a series of measures to rein in the fastest-growing shadow banking sector. The China Banking and Insurance Regulatory Commission (CBIRC) last month issued draft rules to cap trust companies’ total investments in nonstandard credit assets at 50% of the funds they raise from the public.
Since March, the CBIRC has issued window guidance to several trust companies, including Everbright, requiring them to reduce their financing trust business.
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