Regulator increases pressure on loan repackaging

China’s banking regulator has told trust companies to cease cooperation with banks in a move to crack down on banks that move some loans off their balance sheets to avoid regulatory controls, the Wall Street Journal reported. According to an unnamed official at a trust firm, the China Banking Regulatory Commission warned about the growing volume of wealth-management products that repackaged bank loans. When trusts hold loans, banks usually don’t include them on their books. This practice is believed to have increased following the regulators clamp down on new loan growth after last year’s issue of US$1.1 trillion in new loans. According to Tang Liqiong, an analyst at Shanghai Benefit Investment Consulting, the volume of outstanding loans packaged into trust products reached US$369 billion in the first half of this year.