Sichuan Trust fined $ 5.4 million for shadow banking scandal and 12 other violations
Trouble Sichuan Trust Co. Ltd. was fined 34.9 million yuan ($ 5.4 million) – one of the biggest fines ever imposed on a Chinese trust company – for carrying out quasi-shadow activities banking and issued illicit loans, said a provincial banking regulator.
China once freewheeled $ 3 trillion (link in Chinese) Confidence industry under closer scrutiny as regulators become increasingly concerned about financial risks in the sector, which plays an important role in financing by providing loans to companies at high risk and those who have difficulty obtaining credit from traditional banks.
The southwestern province-based company has been fined for 13 breaches of the country’s banking supervision law, according to a declaration (link in Chinese) posted on Friday by the Sichuan branch of the China Banking and Insurance Regulatory Commission (CBIRC).
The Sichuan Trust is one of the latest targets on regulators’ radar as China tightens its control over the trust sector.
In 2019, about a third of the nation’s 68 trust companies have been sanctioned by regulators for a range of violations, including making illicit off-balance sheet loans and real estate investments. Listed in Shanghai Anxin Trust Co. Ltd. (600816.SH), once the darling of the trust industry, collapsed last year and turned out to have a 50 billion yuan black hole in its books.
Cover: Anxin Trust’s $ 7 billion investment black hole
It was found that Sichuan Trust illegally transferred money in trust products to its shareholders and related parties, according to the regulatory statement.
The trust company was also found to have guaranteed returns on some of its trust products to investors, illegally raised funds for real estate companies and conducted quasi-shadow banking activities, the statement said. The company has also illegally promoted “Trust of Trust” (TOT) products, which buy into other trust products that invest in a wide variety of assets, including bonds, stocks and loans.
Sichuan Trust fell into the limelight after the company failed to repay principal and interest on a trust product in May 2020, which triggered a wave of protests by investors and highlighting the company’s credit crunch.
The stake was the reimbursement of approximately 25 billion yuan that investors invest in Sichuan Trust’s TOT investments, Caixin reported in June. These products are legal in China, but most of the underlying assets of Sichuan Trust’s TOT products have become risky as a result.
In December, the Sichuan local government and the Sichuan branch of the CBIRC took control of Sichuan Trust by sending a team to oversee its operations and pushing for a management reshuffle.
Timmy Shen and Denise Jia contributed to this report.
Download our app for receiving last-minute alerts and reading news on the go.
Follow the Chinese markets in real time with the new stock database.
You have accessed an article available only to subscribers