FRANKFURT, March 3 (Reuters) - China’s shadow banking sector contains clear risks that financial authorities there are trying to manage without upsetting the broader economy, Bank of England Governor Mark Carney said.
China’s financial regulators are trying to crack down on explosive growth in complex interbank transactions used to evade lending restrictions so as to curb excess credit growth and prevent a debt crisis as China’s economy slows.
The push by the authorities comes as banks have found ways to expand credit through shadow banking channels that have raised concerns over the potential for systemic risk.
“Shadow banks play a considerable role in China and the structures there contain clearly discernable risks,” Carney told German business daily Handelsblatt, which printed his comments in German in its Monday edition.
Carney chairs the Financial Stability Board (FSB), the regulatory task force for the Group of 20 economies (G20).
Asked whether China’s financial supervisors had recognised the shadow banking risk, Carney replied: “They have recognised the risk and are trying to manage the problem such that the country’s development does not suffer.”
Turning to global central banking, Carney said national central banks should pay attention to the consequences of their decisions for the world economy.
“The (U.S.) Fed already pays attention to what happens in other parts of the world,” he said.
”But like all of us, it has a legal mandate.
“However, I think all central bankers should pay attention to the consequences their decisions have for the world economy. Furthermore, we showed in times of crisis that we can work well together - for example with coordinated interest rate cuts.” (Writing by Paul Carrel; Editing by Catherine Evans)