China regulator orders more disclosure on shadow bank products

SHANGHAI/BEIJING (REUTERS) - China's bank regulator will require banks to report detailed information on their holdings of wealth management products beginning in 2014, four sources with direct knowledge of the new regulations said on Friday.

Wealth management products are short-term investment products that Chinese banks market to clients as a higher-yielding alternative to traditional bank deposits.

Many of them are recorded off-balance-sheet and are used to finance lending to risky sectors such as real estate developers and local governments, to which banks are otherwise discouraged from lending.

WMPs are a crucial element of China's shadow banking system, which analysts warn has contributed to excessive debt growth that has led to a buildup of financial risks.

The new rules will require banks to disclose their holdings of WMPs and related transactions through a new nationwide registration system managed by the China Central Depository and Clearing Co, the state-backed clearing house for the country's interbank bond market, the sources said.