August 21, 2013 / 10:43 AM / 6 years ago

China c. bank tightens oversight of trust loans

BEIJING, Aug 21 (Reuters) - China’s central bank will include loans extended by all trust companies in its database, it said on Wednesday, as part of efforts to rein in risks in the sprawling shadow banking sector.

The fast-growing trust sector forms the largest part of China’s non-bank lending activities, also called shadow banking loans, and helps banks dispose of unwanted assets, making it hard for financial regulators to assess the exact risks.

The People’s Bank of China started to incorporate some trust loans when it first published, in 2011, the total social financing aggregate, a wider gauge of liquidity in the economy than the broad M2 money supply.

“Trust loans have been growing pretty fast in the past few years,” the central bank said in a statement on its website, www.pbc.gov.cn.

“While playing an active role in supporting the real economy and improving financial services, trust loans bear relatively high risks and some of the trading information is not transparent,” the PBOC added.

It urged trust companies already included in the database to provide timely, accurate and complete information about their loans, while demanding the rest of the sector start submitting loan data as soon as possible.

The central bank is also working on a plan to include information about all entrusted loans, already a part of the total social financing aggregate, in its credit database, according to the statement.

Earlier central bank data showed the trust sector extended 107.4 billion yuan ($17.5 billion) of new loans in July, down from an average of 205 billion in each of the first six months, after a government clampdown on risky lending late in June. ($1=6.1246 Chinese yuan) (Reporting by Langi Chiang and Kevin Yao; Editing by Clarence Fernandez)

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