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[SHANGHAI] China's banking regulator has set up a new department to supervise trust companies, the latest move by authorities to establish greater control over some of the largest players in the country's shadow-banking sector.
Trust companies are non-bank lenders that raise funds by selling high-yielding investments known as wealth management products (WMPs) and use the proceeds to fund loans to risky borrowers such as property developers, local governments and others to whom banks are reluctant to lend.
Under the regulatory framework, published on the China Banking Regulatory Commission's (CBRC) website on Tuesday, the regulator also plans to set up new departments to oversee city commercial banks and credit cooperatives.
Core reasons for the reform are to "strengthen on-site inspection and supervision" and "further strengthen risk supervision" according to the framework.
China published rules in December governing the management of an insurance fund planned for its US$2.1 trillion trust industry, a move to reduce financial risk in shadow banking.