China banks hiding losses in 'opaque' receivables accounts

Hong Kong

CHINESE lenders are reacting to a regulatory crackdown on shadow financing by increasing activity in their more opaque receivables accounts, a practice Commerzbank AG estimates may result in losses of as much as 1 trillion yuan (S$216 billion) over five years.

Banks are increasingly using trusts or asset management plans to lend and recording them as funds to be received rather than as loans, which are subject to stricter regulatory oversight and capital limits. The German bank's forecast is based on total outstanding receivables of around 11.5 trillion yuan.

"Chinese banks haven't provisioned for receivables and those are essentially riskier loans," said Xuanlai He, credit analyst at Commerzbank in Singapore.…