China bank regulator probes borrower guarantee chains - document


Reuters

SHANGHAI, April 21 (Reuters) - China's banking regulator has
asked lenders to look into the guarantee chains of its
borrowers, according to a document seen by Reuters, the latest
in a slew of policy initiatives to reduce the risk of defaults
snowballing through the financial system.
    In a document circulated on April 13, the China Banking
Regulatory Commission (CBRC) asked lenders to look into the risk
associated with guarantee chains and develop appropriate methods
to deal with borrowers who are at risk.
    China's banks have found some guarantees for loans
ineffective because the guarantor is in a chain of borrowers who
have all guaranteed each other's liabilities, leading the
default of one to impact the rest of the chain.
    "The CBRC asked us to hand over the debt and guarantor
details for all our Shandong borrowers," said a banker at a
foreign lender in Shanghai.
    The CBRC has asked lenders specifically to probe their
borrowers in the eastern province of Shandong and northeastern
province of Liaoning, according to the document.
    The news was first reported by financial publication Caixin.
    Moody's Investors Service warned in a recent report that
Chinese banks are facing increasing risks because of rising
leverage in the system and financial sector interconnectedness,
not just between the formal banking system but also with the
shadow banking system.
    Liaoning firm China Huishan Dairy Holdings Co Ltd <6863.HK>,
which saw $4 billion wiped off its shares in a single day in
March, said it had missed loan repayments and lost contact with
a key executive in charge of its finances after local media
reported that 3 billion yuan ($436.05 million) had been
misappropriated. [nL3N1H51KV]
    ($1 = 6.8800 Chinese yuan)

 (Reporting by Li Zheng and Engen Tham in Shanghai; Editing by
Jacqueline Wong)
 ((engen.tham@thomsonreuters.com; +86-21-6104-1769; Reuters
Messaging: engen.tham.thomsonreuters.com@reuters.net))

Keywords: CHINA BANKS/REGULATION



This article appears in: Fundamental Analysis , Stocks , Banking and Loans , Technology , Bonds
Referenced Symbols: 6863


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