Guangdong Province Touts Success of Shadow Banking Monitoring System Following Plunge in Interbank WMP’s

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The Guangdong province government has touted the success of its efforts to contain the regional shadow banking sector.

The Guangdong province banking regulator said that it had unveiled specialist work plans and conducted a pilot program for the establishment of a “shadow banking monitoring index system” (影子银行监测指标体系) in 2020 as part of effort to contain lending beyond the traditional banking system.

The regulator said that in 2020 it had “put pressure on outstanding amounts, squeezed channels, restricted investment and engaged in targeted strikes against funds that leave the real for the empty, for a vigorous, full year reduction in operations that have the goal of regulatory arbitrage or concealing risk, such as trust company interbank channels, interbank wealth management and interbank nested investment.”

As of the end of 2020 legal person bank interbank wealth management operations in Guangdong province saw a YoY decline of 42.07%, while trust company interbank operations declined by 54.86% compared to the start of the same year.

Guangdong province also highlighted the success of efforts to ensure that banking “returned to the original purpose of finance.” Loans for investment in the real economy increased 1.404975 trillion yuan in 2020, 22.11% ahead of the figure for 2019.

Guangdong province has also sought to strengthen its “dynamic credit risk monitoring mechanisms,” and implement advance management of credit losses.

As of the end of 2020 non-performing loans in arrears for more than 90 days as a share of all non-performing loans (NPL) had fallen by 5.4 percentage points compared to the end of 2019. The provisions coverage ratio of banking sector institutions in Guangdong province was 208.78%, for a YoY rise of 15.29 percentage points.

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