PBOC gets tougher on trust loans

Part of crackdown on shadow banking sector.

The People’s Bank of China, the central bank, will include loans extended by all trust companies in its database as part of a campaign to curb risks to the economy posed by the massive shadow banking sector.

The fast-growing trust sector forms the largest part of China's non-bank lending activities, also called shadow banking loans. It helps banks dispose of unwanted assets and hinders financial regulators in determining exact risks.

PBOC said trust loans have been growing “pretty fast” in the past few. It noted that despite 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.

PBOC 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.

It revealed that the trust sector extended US$17.5 billion of new loans in July, down from an average of US$33.5 billion in each of the first six months after a government crackdown on risky lending late in June.