China Bank Regulators to punish off-balance sheet private lending

China’s banking regulator told lenders that illegal off-balance-sheet lending will be severely punished, the Shanghai Securities Newsreported, citing bankers it didn’t identify.

Violations include certain methods of lending via wealth management products, transferring loans among banks and granting loans through intermediary banks, the Chinese-language newspaper said today. The report didn’t specify the punishments that the China Banking Regulatory Commission may impose.

Off-balance-sheet lending has surged as the government tightened loan quotas, after a credit boom designed to support growth amid the global financial crisis began to fuel inflation and asset-bubble risks. The CBRC banned lenders from transferring holdings in commercial bills to trust companies as part of efforts to stem practices that circumvent regulatory rules, a person with knowledge of the matter said last month.

Phone calls to the regulator’s Beijing-based media office seeking comment on today’s report went unanswered. CBRC Chairman Shang Fulin said the regulator would seek to contain risks in off-balance-sheet operations this year, according to a statement on the watchdog’s website Jan. 8.

The CBRC will crack down on entrusted loans that illicitly use banks’ own funds rather than simply transferring funds between two parties, as such transactions are meant to do, and will inspect lenders’ commercial-bill financing operations, Shanghai Securities said, without saying where it got the information or providing details.


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