China’s Banking Regulator Curbs Interbank Lending to Combat Risk

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The China Banking Regulatory Commission says that it has achieved significant progress in containing risk in the financial system by reducing the level of interbank lending.

Xiao Yuanqi, head of CBRC’s prudential regulation bureau, said at a press briefing that interbank assets and liabilities had fallen 3.4 trillion yuan and 1.4 trillion yuan respectively as of the end of October compared to the start of 2017.

Interbank lending is considered a key form of shadow banking in China, which heightens risk by obscuring the final destination of funds, while also raising financing costs by lengthening the chain of capital transmission.

Interbank wealth management products saw a net decline of 2.7 trillion yuan across the first ten months of 2017, while growth in the value of wealth management products has slowed dramatically to 4.7%, for a mammoth drop of 26.5 percentage points compared to the same period last year.

Growth in off-balance-sheet business eased to 16.1% by the end of October, as compared to annualised rates of more than 50% over the past several years.

 

 

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