Mar 15, 2021 07:41 PM

Sichuan Trust Fined $5.4 Million Over Shadow Banking Scandal, 12 Other Violations

Troubled Sichuan Trust Co. Ltd. has been fined 34.9 million yuan ($5.4 million) — marking one of the biggest fines ever levied against a Chinese trust company — for conducting quasi-shadow banking businesses and issuing illicit loans, a provincial banking regulator said.

China has put the once free-wheeling $3 trillion (link in Chinese) trust industry under closer oversight as regulators have grown concerned at financial risks in the sector, which plays an important role in financing by providing loans to high-risk companies and those who have difficulty getting credit from traditional banks.

The southwestern province-based company was fined for 13 transgressions of the country’s Banking Supervision Law, according to a statement (link in Chinese) issued Friday by the Sichuan branch of the China Banking and Insurance Regulatory Commission (CBIRC).

Sichuan Trust is one of the latest targets on regulators’ radar as China tightens up scrutiny over the trust sector.

In 2019, about one-third of the country’s 68 trust firms were punished by regulators for a range of violations, including conducting illicit off-balance-sheet lending and real estate investments. Shanghai-listed Anxin Trust Co. Ltd. (600816.SH), once the darling of the trust sector, collapsed last year and was found to have a 50 billion yuan black-hole on its books.

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Cover Story: Anxin Trust’s $7 Billion Investment Black Hole

Sichuan Trust was found to have illegally transferred money in trust products to its shareholders and related parties, according to the regulatory statement.

The trust company was also found to have guaranteed returns on some of its trust products to investors, illegally raised funds for property firms and conducted quasi-shadow banking activities, the statement said. The company also illegally promoted “trust of trust” (TOT) products, which buy into other trust products that invest in a wide variety of assets, including bonds, stocks and loans.

Sichuan Trust fell under the spotlight after the company failed to repay principal and interest on a trust product in May 2020, triggering a wave of protests by investors and putting the company’s credit crisis in the spotlight.

At stake was the repayment of about 25 billion yuan that investors put into Sichuan Trust’s TOT investments, Caixin reported in June. Such products are legal in China, but most of the underlying assets of Sichuan Trust’s TOT products turned risky as a result.

In December, the local government in Sichuan and the Sichuan branch of the CBIRC took control of Sichuan Trust by sending in a team to supervise its operations and pushing for a management reshuffle.

Timmy Shen and Denise Jia contributed to this report.

Contact reporter Tang Ziyi ( and editor Lin Jinbing (

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