January 26, 2018 / 12:42 PM / a year ago

China's banking regulator targets corporate debt, leverage

BEIJING (Reuters) - China’s banking regulator offered an ambitious report of its priorities for the current year that included lowering corporate debt, reducing shadow banking and cleaning up financial holding groups, as part of official efforts to reduce financial risk.

FILE PHOTO: A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File Photo

In a statement late on Friday, the China Banking Regulatory Commission (CBRC) said that overall risk in the banking sector was under control, but the situation remained “grim and complicated”.

“Regulators must keep clear heads and cannot be blindly optimistic,” it said. The statement followed the conclusion of CBRC’s national banking supervision and management meeting, which outlines the year’s key goals.

Among the regulator’s top priorities is lowering corporate debt, while strictly controlling credit to highly indebted firms, it said.

CBRC also elevated cleaning-up financial holding companies and disposing of high-risk institutions, a move that could pave the way for the restructuring of some high-profile companies.

In an interview published last week in the official People’s Daily, CBRC’s chairman warned that “a small number of criminals” had used “complex structures, fictitious investment and circular capital flows to illegally create large financial groups.”

This had become a severe obstacle to advancing financial reforms, which must be strictly dealt with according to the law, he added.

The banking regulator has moved aggressively over the last year to cut the growth of shadow banking assets and the use of off-balance sheet business.

Controlling financial sector risk was identified as a national priority at its Central Economic Work Conference in December. The country’s financial regulators have made clear that supervision is only set to tighten.

The CBRC said other priorities for the year included curbing household leverage, and cracking down on the misappropriation of personal loans for stock market and real estate investment.

The regulator will also continue to shrink interbank investment and promote the transformation of the wealth management business, it said.

Reporting by Matthew Miller and Beijing Monitoring Desk; Editing by Clarence Fernandez

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