CBRC Targets Bank Funds Entering Stock and Real Estate Markets

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The China Banking Regulatory Commission is further intensifying its crackdown on shadow banking activities, specifically targeting illicit flows of funds into the stock and real estate markets.

On 13 January CBRC issued its “Notice Concerning Further Deepening Rectification of Market Irregularities in the Banking Sector” (关于进一步深化整治银行业市场乱象的通知), which lists “breaches of macro-economic adjustment policies, shadow banking and cross-financial product risk” as the “priorities of priorities” for its regulatory undertakings in 2018.

The “market irregularities” that the Notice specifically targets include “illicitly using on or off-balance sheet funds to directly or indirectly invest in the share market,” as well as “providing various forms of on or off-balance sheet financing to real estate developers to pay for land procurement costs.”

Senior officials from CBRC have also indicated that they will step up their punishments of major cases of malfeasance in 2018, as well as engaged in greater coordination with other regulatory authorities such as the recently established Financial Stability and Development Commission when targeting issues such as cross-sector financial product risk.

Domestic observers expect China’s financial regulators to unveil further measures to intensify regulation and standardisation of the country’s shadow banking activities in 2018, potentially leading to negative growth in interbank lending activities, wealth management products and off-balance sheet business.

While analysts says this will put pressure on bank profits in the short-term, regulators hope that the measures will reduce systemic risk within the banking sector.

 

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