Listed Banks Are Shadow Bank Bad Boys
Chinese joint-stock commercial lenders’ aggressive expansion in off-balance-sheet activities is creating a serious risk to the financial system that requires regulatory attention, a new report by the Tsinghua University National Institute of Financial Research says.
The overall level of risk in the Chinese financial system actually fell in the first quarter of the year, when the so-called real economy — a sector that produces actual goods and services — picked up. But this was not the case among joint-stock commercial lenders China Minsheng Bank Co. Ltd., China Everbright Bank Co. Ltd. and Industrial Bank Co. Ltd., said the report, issued Saturday.
Caixin’s attempts to reach the three lenders for comment were unsuccessful.
Such lenders are increasingly engaged in businesses such as “shadow banking” — lending that is often speculative and little-regulated that occurs beyond official banking channels. Such businesses also include “entrusted investments,” or funds that banks lend to external asset managers to invest in bonds, stocks and commodities. Regulators say this creates multiple layers of investments with high level of leveraging, therefore making financial markets vulnerable if a liquidity shock were to occur.