Bill-Financing Operations Risk Reaches USD877 Million This Year; PBOC Is Concerned
Yicai Global
/SOURCE : Yicai
Bill-Financing Operations Risk Reaches USD877 Million This Year; PBOC Is Concerned

(CBN - Global) May 4 -- Mounting risks in the bill-financing business have attracted attention from the People's Bank of China. A succession of risk-related incidents associated with large-sum bills have already occurred among Chinese banks this year with an aggregate value of nearly CNY5.7 billion (USD877.23 million).

Bills, or notes, are used for short-term corporate lending, but have often been used to fund speculative investment, and are sometimes used by banks to inflate balance sheets to meet regulatory requirements.

PBoC, China Banking Association, China Banking Regulatory Commission and other multidisciplinary professionals held a joint conference on bill financing risk management and prevention for the Chinese banking industry on April 27. CBRC sent the heads of its Banking Safety & Security Bureau, On-site Examination Bureau and other policy regulators to attend the conference.

Local CBRC branches have distributed notices to reassess credit risks involved in interbank businesses. "The bill business is no longer a low-risk business as it was traditionally believed to be, and people inside the industry are reassessing the associated risks," a source told CBN.

The Shanghai Branch of the CBRC issued a notice on April 20 to clarify matters related to bill-financing models, including strict bill endorsement and delivery management, the prohibition of 'bill-absent transactions' and the replacement of physical bills with relevant statements in delivery.

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