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Report: China checking on leap in bill financing

(Agencies)
Updated: 2009-02-16 16:48

China's banking watchdog is looking into a jump in discounted bill financing, fearing that the surge could entail excessive risks, the China Business News reported on Monday.

Related readings:  Bank loans see striking rise in Jan  Loan defaults dent bank incomes  Banks get approval for bond trading  China's banks boost assets to 61.1 trillion yuan

The China Banking Regulatory Commission (CBRC) started making inquiries last week after the central bank reported that bill discounting accounted for 39 percent of new bank lending in January, the Shanghai paper quoted an unnamed source as saying.

By comparison, in 2008 discounted bill financing made up just 13 percent of total bank lending.

Bill discounting is a low-risk business for banks, and the newspaper did not spell out the regulator's specific worries.

But it said the commission expressed similar concerns during an earlier burst of bill financing in 2003, when investigators unearthed a number of irregularities that posed risks to banks.

Some economists have expressed concern that banks are ramping up bill financing rather than making longer-term loans to finance corporate investment.

Companies can borrow for six months through discounted bills at a rate of about 1.8 percent, much cheaper than the benchmark lending rate of 4.86 percent for the same maturity.