ATAHK reads from China Daily that CHINA’S banking regulator has asked some commercial banks to suspend issuance of classified asset management products, sources with knowledge of the matter said Wednesday.
The China Banking Regulatory Commission (CBRC) transmitted the so-called window guidance, a sort of informal administrative edict, orally, the sources said.
Classified asset management products each have two sub-products, one priority and one secondary. The former is promised repayment first in the event of losses, but returns are smaller. The latter carries higher returns but bears the brunt of losses. Typically, classified asset management products are very risky products, particularly when the market is volatile.
“The guidance was conducted orally, without giving reasons,” said a source. “However, regulators are apparently worried about bond defaults or off-balance sheet risk, with urban commercial banks’ businesses typically more radical than major banks.”
Chinese markets are pricing in increasing risks following an unprecedented number of defaults this year. A long list of high-yield bond issuers in the US$8 trillion domestic debt market are due to make debt payments this month.
The CBRC, in a move to rein in the rapidly growing “shadow loans” industry, told commercial lenders earlier this month to properly account for lending products that may appear on their balance sheets as lower-risk investments.
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