SHANGHAI (Reuters) - China’s CITIC Trust Co Ltd has pledged to regulators it will reduce its business with banks next year, two sources with knowledge of the matter said on Thursday, in order to comply with regulatory requirements.
Trust firms, which are some of China’s largest shadow bankers, are in retreat as Beijing takes aim at leverage in the financial system to curb risk.
China’s banks use trust companies as a conduit to lend to borrowers which they would otherwise be prohibited from lending to such as risky developers. It is also a way to avoid regulations that require risks to be properly recognized and adequate provisions to be set aside for them.
Last week, the China Banking Regulatory Commission banned lenders from using trust firms to skirt regulations and cover up risk in Beijing’s latest effort to crack down on shadow banking.
CITIC Trust, a unit of conglomerate CITIC Ltd, was not immediately available for comment.
The trust plans to work with their banking partners to terminate some parts of their business ahead of schedule, the two sources said.
Reporting by Li Zheng and Engen Tham; Editing by Ryan Woo and Muralikumar Anantharaman