China Tightens Screws on Real Estate Trusts

Funding for marginal developers will tighten in the second half of 2018.

iFeng: 穿透式监管趋严 房地产信托快速增长时代料终结

As of the 8th, this year, a total of 9 banking regulatory bureaus in various banking regulatory bureaus issued 15 tickets to 11 trust companies. Among them, two trust companies received a fine for the use of trust funds for land reserve loans, and one trust company was punished for failing to handle the approval of real estate project loans. The industry believes that the regulatory authorities are tightening supervision over the trust products, strengthening the supervision of the underlying assets in violation of the real estate project and the final investor penetration identification. As the risk of real estate business in the second half of the year is further magnified by the influence of regulatory policies and the factors such as the high pressure of supervision, the growth rate of real estate business of trust companies may slow down.

...“The number of tickets has increased compared with previous years. Especially before 2017, there are only a few individual tickets per year, but it has increased since last year, indicating that the regulatory penalties and warnings are strengthened, and this trend will continue. The regulatory policy will maintain a high pressure.” Chen Ping (pseudonym), a researcher at a trust company in the North, told the China Securities Journal that it is not only a trust, but also the entire financial industry. Tickets for banks, insurance companies and securities companies are also increasing. The inevitable performance of strict supervision.

Another Beijing-based trust researcher Wang Wei (pseudonym) disclosed to the China Securities Journal that the recent administrative penalties imposed on the trust company by the Yinbao Supervision System were based on the results of on-site inspections commissioned by the local banking regulatory bureau at the end of last year. Some of the regulatory authorities disclosed relatively detailed, while others may be relatively lax. The actual number of fines may be more than currently disclosed.