atans1

China: Rerun of US Sub Prime? Part II

In Banks, China on 13/08/2010 at 5:25 am

Chinese banks have been ordered to account for around Rmb2,300bn ($340bn) in off-balance sheet loans in a move that could put some lenders under serious stress and require another large round of capital-raising, reports FT.

Lenders must put all loans sold or transferred to lightly regulated Chinese trust companies back on their books by the end of 2011. And must stop using “informal securitisation” to evade regulatory requirements.

Trying to ensure that banks don’t do what Citi, Merrill Lynch and other US banks were doing? Concealing their leverage albeit legally.

Reminder: Other big problematic numbers are loans to local governments, more than US$230bn of which are considered to be at serious risk of default, and real estate exposure, which accounts for roughly one-tenth of the big banks’ corporate loan books. FT

We live in interesting times.

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