China banking regulator softens tone amid financial crackdown
The CBRC seeks to reassure lenders as the bond market headed for a seventh straight weekly decline
China’s banking regulator on Friday took a step back from its previous stern stance, reassuring banks that the recent tightening of restrictions is not designed to stop their regular lending and investment activities.
Recent directives aimed at reducing leverage have sent jitters through financial markets that spurred a stock and bond market rout.
In an extraordinary briefing Friday afternoon, Xiao Yuanqi, director of the prudential regulation bureau under the China Banking Regulatory Commission, said that banks are now undertaking “self-examination” into whether their activities have amounted to “arbitrages” that the regulator vowed to crackdown. They will be given sufficient time to eliminate any practices found to be in violation of the rules eventually, he told them.
“We will open the front doors while shutting down the back doors. We’ll proactively encourage lawful bank businesses and leave the front door wide open,” said Xiao.
The softening in tone came after the yield on 10-year treasury notes touched a two-year high of 3.7 per cent on Wednesday as the bond market headed for a seventh straight weekly decline, the longest run of losses since September 2013.
The CBRC issued seven documents in late April aimed at cleaning up irregular practices in the financial market.
