China regulator steps up risk management of trust companies

CHINA’S National Financial Regulatory Administration on Thursday (Nov 16) issued interim measures for the supervisory rating of trust companies to step up risk management of the firms, according to a statement released on its website.

The measures aim to comprehensively evaluate operations and the systematic impact of trust companies and to promote “healthy” operations, the regulator said.

Concerns about the outsized exposure of China’s US$3 trillion shadow banking sector, roughly the size of Britain’s economy, to property developers and the wider economy, have grown over the past year as the sector lurched from one crisis to another.

Trust firms will be rated by corporate governance, capital requirements, risk management, behavior management and business transformation, the measures said, to replace a previous version released in 2016.

Under the new measures, the regulator further strengthened the supervision of trust firms that have systematic influence.

Trust firms with a higher rating result show greater risks and will be attached with closer regulatory attention, the regulator said, adding irregularities including selling trust products to unqualified investors and guaranteeing returns.

SEE ALSO

China orders local governments to cut exposure to public-private projects as debt risks rise: sources

China’s economic recovery is losing momentum, data show

China’s credit growth still weak in October with low loan demand

The Business Times turns 50

Five decades of milestones and moments that shaped Singapore’s success story - told through our headlines.

Explore BT50»

Since late July, Zhongrong International Trust, which managed assets worth US$108 billion at end-2022, has missed payments on dozens of products since late last month, raising fears that China’s financial system may be at risk of contagion from a prolonged property market crisis and a rapidly slowing economy. REUTERS