China’s regulators said Wednesday that they plan further restrictions on the ability of banks to take on risky loans disguised as investments, aiming to clean up an inventive array of off-balance-sheet practices that have amplified risk in the financial system. According to The Wall Street Journal, the tightening would mark potentially the most comprehensive overhaul of rules in this segment of banking regulation in five years. The draft rules spell out specific areas that the China Banking Regulatory Commission is targeting for closer scrutiny, such as banks buying or selling high-yield investments lumped together under the term “wealth-management products.” Still, the language, though far more substantial compared with the last formal guidance issued in 2011, remains broad enough to likely give banks considerable leeway in interpreting the requirements.
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