15 February 2019
Guo Shuqing will coordinate with other financial authorities to plug loopholes in regulations for financial products. Photo: HKEJ
Guo Shuqing will coordinate with other financial authorities to plug loopholes in regulations for financial products. Photo: HKEJ

New CBRC chief to tackle shadow banking, property bubbles

Guo Shuqing, newly appointed chairman of the China Banking Regulatory Commission, has vowed to clamp down on shadow lending and curb funding for property speculation.

In a press briefing with his deputies in Beijing on Thursday, Guo said he will coordinate with other financial authorities, including the central bank, to plug loopholes in regulations for financial products and update rules that no longer fit with banks’ current business and risk management, Bloomberg News reports.

“Banks, trusts, fund-management firms, brokerages and insurers all have asset management operations, but because they have different regulators and are subject to different rules, there’s been some chaos,” Guo was quoted as saying.

Having one set of rules for asset management products would enable each regulator to “set higher standards” as well as “improve transparency and expose the financing hidden in the shadows”, he added.

The CBRC, the People’s Bank of China, and the securities and insurance regulators are working more closely to curtail risks from the shadow-banking sector, Bloomberg said.

In addition to the joint rules, the banking regulator is drafting a separate regulation on banks’ wealth-management products, CBRC vice chairman Cao Yu said at the briefing.

WMPs, which promise higher returns than deposits and are viewed by many investors as a form of risk-free savings, surged to 29.1 trillion yuan (US$4.2 trillion) as of Dec. 31, Cao said.

The surge in WMPs, mostly issued by lenders, has accounted for a significant proportion of the expansion in shadow banking in China, leading the PBOC to start including the products in its macro-prudential assessment framework this quarter to better gauge credit growth and potential financial-system risks.

Guo said the CBRC is also paying close attention to real estate bubbles, noting that 45 percent of the nation’s new loans last year went to the property sector, with most going to personal mortgages.

Although the overall leverage for Chinese households was “not high”, the fast growth in their borrowing over the last two years is worth monitoring, Guo said.

Guo, 60, was appointed CBRC head last month after serving as governor of eastern Shandong province since 2013.

He also served as chairman of the China Securities Regulatory Commission, China Construction Bank Corp. and State Administration of Foreign Exchange.

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