Financial China

How risky is Rmb 2,000bn in banks' off-books lending?

  • Published 29 Jul 2010

One upshot of the regulator's order to halt a ballooning business in off-balance-sheet lending may be to inject more investment liquidity into capital markets.

In January (CC Jan 28 Financial China), we cautioned about the phenomenon of off-balance sheet loans called "loan-related wealth management products". They are created by banks issuing wealth management products in co-operation with Trust companies. In June, we warned again about the risk of such off-balance loans (CC June 17 Financial China) while noting that the China Banking Regulatory Commission (CBRC) had held a series of meetings with banks and trust companies since April trying to control the ballooning scale of such products. However, the CBRC realised by end-June that the banks were not listening.

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