Collective Asset Management Plans Banned from Investing in Entrusted Loans

Chinese regulators have issued a ban on collective asset management plans investing in credit assets such as entrusted loans, according to sources speaking to Reuters.

The sources say the Asset Management Association of China has suspended the registration of collective asset management plans, which are a popular type of investment pool, as well as halted the extension and increase of existing plans.

China’s financial regulators have continued to dial up regulation and scrutiny of the country’s burgeoning shadow banking sector since the start of 2018, following the launch of a heavy-handed deleveraging campaign last year.

Earlier this week the China Banking Regulatory Commission issued new regulations that tighten the screws on entrusted loans, as well as malfeasance by key shareholders in commercial banks.

Entrusted loans (委托贷款) involve lending between two parties where a commercial bank serves as an intermediary for the provision of funds to a borrower designated by the lender. 

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