Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), said that the organization would launch a thorough investigation of loans made during the past few years, Bloomberg reported, citing Shanghai Securities News. The regulator will examine “shadow banking” businesses, as well as the banks’ relationship with trust companies. Liu told Shanghai Securities News that financial innovation should be drawn from the real economy, as opposed to financial models, and should not only benefit the banks. The announcement comes after increasing speculation that many loans extended during the 2009 lending binge, particularly to local government financing vehicles, may be non-performing. Last summer a leaked reported from the CBRC suggested that over a fifth of total loans extended to these financing vehicles may go bad.
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