Banks barred on bill transfer to trusts
Source: Bloomberg News |
January 14, 2012, Saturday
|
Print Edition
Print Edition
CHINA'S banking regulator has banned lenders from transferring stakes in commercial bills to trust firms, a person with knowledge of the matter said.
The China Banking Regulatory Commission aims to prevent practices that skirt regulatory restrictions on credit growth, curb loan risks and better protect investors, the person said, declining to be named because the order isn't public.
China has tightened oversight of trust companies since 2010 after banks used them to evade loan restrictions imposed to rein in inflation and property prices. Offloading commercial bills to the trusts allowed banks to meet loan-to-deposit ratio requirements and to lend to restricted industries, Standard & Poor's said.
"We do see the Chinese regulator increasingly tightening its regulations on the bank trust business on concern that some of the macro measures to counteract inflation last year will not be that effective because of this channel," Liao Qiang, a Beijing-based director for financial institution ratings at S&P, said yesterday.
Commercial bills, which are issued by a company and typically endorsed by a bank, are often used by holders to borrow money from lenders at a discounted value.
The China Banking Regulatory Commission aims to prevent practices that skirt regulatory restrictions on credit growth, curb loan risks and better protect investors, the person said, declining to be named because the order isn't public.
China has tightened oversight of trust companies since 2010 after banks used them to evade loan restrictions imposed to rein in inflation and property prices. Offloading commercial bills to the trusts allowed banks to meet loan-to-deposit ratio requirements and to lend to restricted industries, Standard & Poor's said.
"We do see the Chinese regulator increasingly tightening its regulations on the bank trust business on concern that some of the macro measures to counteract inflation last year will not be that effective because of this channel," Liao Qiang, a Beijing-based director for financial institution ratings at S&P, said yesterday.
Commercial bills, which are issued by a company and typically endorsed by a bank, are often used by holders to borrow money from lenders at a discounted value.
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