China banks see loophole in leasing firms

Shanghai

CHINESE banks scrambling to meet capital adequacy rules stepped up lending to financial leasing companies in the past year as they moved away from traditional corporate loans that require them to set aside more funds as provisions.

Under global regulations known as Basel III introduced last year, China's biggest banks have to increase their capital as a percentage of their assets. To help free up funds to meet the rules, banks are looking for ways to cut provisions for some loans - even if they have to lend to companies leasing ships, tractors and building equipment in some of China's most vulnerable sectors.