China Regulator Urges Banks To Reduce Short-term Borrowing

China’s banking regulator is pressuring banks to curb reliance on short-term borrowing and control risks from off-balance-sheet lending, according to a document obtained by Reuters, following two severe cash crunches in the last six months.

While China is pushing to reduce systemic risks posed by the rise of shadow banking, analysts say its focus is on curbing the riskiest off-balance-sheet lending practices rather than ending the practise altogether.

The China Banking Regulatory Commission (CBRC) has set up a leadership group on banking industry reform headed by its chairman Shang Fulin, according to a source close to the regulator.

“The CBRC is requiring banks … to push forward reform in the two areas of wealth management and interbank business,” the source told Reuters, requesting anonymity because he was not authorized to speak publicly.

“The commission will come up with a reform plan in the first quarter and preliminary results on these two focal points of reform should be evident by the end of June.”

The document is the text of a speech delivered by CBRC Vice Chairman Zhou Mubing at the agency’s annual work meeting on January 7. The 15-page speech was officially distributed as a circular to banks the following day.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza