Credit Curb
By Jayantha Kovilagodage
China's trust companies asked to halt bill discounting
BEIJING, Jan 12 (AsiaPulse) - China Banking Regulatory Commission (CBRC) on Wednesday required trust companies to suspend the issue of bill-related trust products in an oral notice, according to a Shanghai Securities News report on Thursday.
The surging bill-related trust products to certain degree have affected the regulators' control of banks' lending scale.
Due to tight credit in 2011, enterprises showed strong demand for bill discount. However, banks were under pressure to meet the bill discount demand due to high reserve requirement ratio requirement and drop in the deposits.
Thus, banks cooperated with trust companies to issue bill-related trust products to provide financing for their clients.
By the end of November, 2011, a total of 235 trust products were issued to invest in bills and notes, of which, 146 bill-related trust products were issued after December and accounted for 21.86 per cent of the total.
Market insiders said that banks could avoid regulators' supervision on their lending by cooperating with the trust companies in issuing bill-related trust products.
