China Tries to Restrict Shadow Banking

FT Alphaville: Document 82 and slapping down China’s shadow loan market
A whole new Document is out that could see China’s banks having to raise over Rmb1tn in new capital.

Specifically, it’s the recently released Document 82 which is aimed at curbing excesses in those shadow loans, particularly in banks’ trust beneficiary rights products (TBRs) and directional asset management plans (DAMPs).

What are they (some of) you ask?

Well it all begins with the idea that there are restrictions governing how banks and trusts operate. So banks put a layer of ownership in between to skirt those restrictions and grab some benefit. As the Economist described TBRs: “A bank sets up a firm to buy loans from a trust; it then sells the rights to the income from those loans to the bank—a TBR is born.”

While DAMPs, per the WSJ, “work in a similar fashion to trusts, except that a securities firm acts as middleman between lender and borrower.”

UBS’s excellent Jason Bedford (in a note from last Thursday) meanwhile has them looking like this:
Much more at FT Alphaville.

No comments:

Post a Comment