SHANGHAI (Reuters) – China’s banking regulator is carrying out nationwide inspections on financial institutions such as trusts to check on their shadow banking and interbank activities, the China Securities Journal reported on Wednesday citing industry sources.
The move was in line with a notice issued by the China Banking Regulatory Commission (CBRC) in January that it planned to step up oversight to reduce financial risks, it said.
The CBRC’s inspections, in particular, looked at companies’ channel businesses, which are financing services designed to help move deposits into risky investments via products often designed to dodge capital or investment regulations.
This has prompted some trust companies to suspend their channel business, the newspaper said.
Beijing has in recent months displayed growing concern over the country’s massive shadow banking industry, involving lending conducted outside the formal banking system.
It fears that a big default or series of loan losses could cascade through the world’s second-biggest economy, leading to a sudden halt in bank lending.
(Reporting by Brenda Goh; Editing by Stephen Coates)