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06 January 2020

China plans to support troubled financial firms, curb property risks

The Chinese regulator is encouraging the conversion of household savings into long-term capital investment and the greater development of corporate annuity and endowment insurance businesses.

Small banks pose a risk to the Chinese economy, which is already growing at its weakest pace/Bloomberg

China’s financial regulator said that it will implement a series of measures to shore up the nation’s troubled smaller banks and insurers while continuing a clampdown on shadow financing and property speculation, reported Bloomberg.

The China Banking and Insurance Regulatory Commission (CBIRC) said that the regulator will introduce measures to eliminate bad loans and promote mergers, capital injections and the restructuring of high-risk institutions.

Additionally, the regulator stated that other steps include setting up a resolution fund and bridge banks while introducing new investors as well as allowing market-oriented exits.

Many of China’s 3,000 small banks are coping with a mountain of bad loans, prompting the government to crack down on risky funding practises. Small, troubled banks pose a risk to the Chinese economy, which is already growing at its weakest pace since the early 1990s.

The watchdog will gradually lower the risks of shadow financing by reducing non-compliant investments in non-standard assets, while insurance institutions will clean up multi-layered investment and leveraged transactions between related parties, said CBIRC.

CBIRC will also increase risk management in areas such as real estate. It will make sure housing deals are not for speculation and prevent capital from flowing illegally into property markets. Furthermore, CBIRC said that it will continue to resolve the hidden debt risk of local government bonds.

The CBIRC wants wealth management, insurance and trust products to be directly involved in financing and cultivate long-term value investment opportunities.


RELATED STORIES: Chinese economy China Banking and Insurance Regulatory Commission global slowdown





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