China’s banking regulator has put new curbs on the country’s Rmb13.8tn ($2.13tn) entrusted lending business, a sign that the crackdown on shadow banking launched by Beijing in 2017 will extend into the new year.
Rules issued at the weekend by the China Banking Regulatory Commission bar banks from making decisions for companies making entrusted loans, and from providing guarantees for those loans. They also stop the loans from being used to buy equities, bonds or derivatives by the company borrowing.
Entrusted loans are loans made from one company to another in what has come to resemble banking activity but without the same level of risk controls that licensed lenders exercise when making credit decisions.
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