Regulator shuts down backdoor loans

08:35, July 07, 2010      

Email | Print | Subscribe | Comments | Forum 

The banking regulator has clamped down on sketchy lending practices that allowed banks to ignore loan limits and fund risky ventures, the Bank of Beijing confirmed Tuesday.

"We've gotten an oral notification (on this)," Yan Xiaoyan, president of Bank of Beijing (BOB), told the Global Times, confirming previously unverified media reports.

According to the reports, the China Banking Regulatory Commission suddenly halted use of bank-trust wealth management products Friday afternoon.

The bank-trust products let banks use trust funds to give out loans primarily to local governments through backdoor procedures which keep the money off the banks' books. Through this process, the banks not only get to skirt the government's regulations limiting loan outflows, but they also throw all risk of bank-trust product default onto the investors' shoulders.

The lending quota for 2010 is set at 7.5 trillion yuan ($1.11 trillion), down a quarter from last year's total. But while official lending has dropped, the backdoor bank-trust numbers have been on the rise.

The sales value of bank-trust products in the first six months amounted to 2.8 trillion yuan ($412.98 billion), far more than the 1.77 trillion yuan ($261.06 billion) sold in all of last year.

That jump drew the attention of the regulator, the Securities Times reported Tuesday.

This suspension is aimed to curb the deformed lending through bank-trust products, said Hu Yaokun, financing &banking partner of Adfaith Management Consulting.

The tightening control on mortgages and local government lending led to deficient cash flow of property developers and local government financing vehicles (LGFVs), which have stretched hard to get new lending by alternatively less controlled ways such as bank-trust offerings, Hu said.


【1】 【2】

(Editor:黄蓓蓓)

  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • On Sept. 28, tourists travel around the Mingshashan Scenic Area in Dunhuang, Gansu province by camel. With the National Day vacation right around the corner, more and more tourists from home and abroad are going to Dunhuang. Riding on a camel, they travel in the desert to enjoy the cities rare form of natural scenery. (Xinhua/Zhang Weixian)
  • Chinese forest armed forces work together with forest firefighters on Sept. 28. (Xinhua/Chai Liren)
  • Photo taken on Sept. 29, 2011 shows strong wind blows trees in Sanya, south China's Hainan Province. Typhoon Nesat heads towards south China and is moving at an average wind speed of 20 km per hour toward the west coast of China's Guangdong Province. (Xinhua/Hou Jiansen)
  • A fallen tree is seen on a road in Qionghai, south China's Hainan Province, Sept. 29, 2011. Typhoon Nesat was predicted to land in Hainan later Thursday, bringing heavy rainfalls to the island. (Xinhua/Meng Zhongde)
  • Arash Kamalvand (L) of Iran spikes the ball during the semifinal against South Korea at the 16th Asian Men's Volleyball Championship in Tehran, Iran, Sept. 28, 2011. Iran won 3-1 to advance to the final. (Xinhua/Ahmad Halabisaz)
  • A man visits "Thy Word Is Truth, the Bible Ministry Exhibition of the Protestant Church in China", during its opening at Mount Vernon Place United Methodist Church in Washington DC, capital of the United States, Sept. 28, 2011. Through the Bible's various Chinese versions, ancient or modern, as well as pictures, paintings, calligraphy, art works and historical documents, the exhibition was expected to give an overall understanding of how Bible was brought into China, how it was translated, published, distributed and loved. (Xinhua/Zhang Jun)
Hot Forum Discussion