August 18, 2017 / 3:36 AM / 4 months ago

China's regulatory crackdown hits regional banks' balance sheets - Shanghai Securities News

SHANGHAI, Aug 18 (Reuters) - China’s crackdown on shadow banking activities has hit growth of some of its regional banks and severely shrunk their balance sheets, the official Shanghai Securities News reported on Friday, suggesting regulators are managing to slow risky forms of lending.

Since the start of the year, China’s banking regulator has stepped up curbs on shadow banking by limiting the ways in which lenders can invest funds, especially from wealth management products, as part of a broad effort to lower a massive build-up of debt over the past decade.

Regional banks in Beijing and Qingdao have seen both their assets and liabilities shrink and growth slow in the first half from the year-ago period, the paper reported citing provincial banking regulator reports from 13 provinces.

Analysts say the crackdown on wealth management products and other forms of shadow banking activity will hit smaller banks the hardest, as they have been the most active in their expansion of off-balance-sheet activity.

Regulators worry about the opaque nature of shadow banking products as they make it easier for banks to bypass regulatory requirements and provide credit to restricted areas.

Citing bank disclosures, the paper said the non-performing loan ratios vary from bank to bank, with some maintaining a soured loan rate of 1 percent versus as high as 3 percent for others.

At the end of June, the assets held by banks in Beijing hit 21.2 trillion yuan ($3.18 trillion), while total liabilities were 20.32 trillion yean, a fall of 1.8 percent and 1.9 percent respectively, the paper said.

The quality of banking assets was low in the northern provinces of Gansu and Heilongjiang, the paper added. ($1 = 6.6744 Chinese yuan renminbi) (Reporting by Engen Tham)

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