Almost one-third of China’s trust companies were punished by regulators in 2019 for a range of violations, including continuing to conduct illicit shadow banking business and illegal real estate investment, reported Caixin.
The China Banking and Insurance Regulatory Commission (CBIRC) and the People’s Bank of China have penalized at least 22 of 68 Chinese trust companies this year, with fines amounting to RMB 22.5 million ($3.2 million), according to Caixin calculations based on public records as of Sunday.
The fines come as part of a continuing crackdown on trust firms’ misconduct, which includes illegally fueling off-balance-sheet lending via the so-called “channeling business,” in which trust companies facilitate lending by third parties without bearing sufficient risk control responsibility. Channeling is a cornerstone of the shadow banking system, which has drawn mounting concern in recent years as rampant growth has fueled rapid build-up of corporate debt and enabled banks to skirt regulation.
Regulators have also tightened scrutiny over trust firms’ other businesses. Several trust firms, including Citic Trust, were fined this year for violating regulations related to real estate investments. Some firms were also punished for inappropriate corporate governance, flawed due diligence or violations of information disclosure rules, according to official records.