From the FT:
Foreign banks in China have warned that they will suffer severe “collateral damage” from new rules aimed at limiting off-balance sheet lending by domestic banks.
Beijing has drafted regulations to restrict interbank loans after financial institutions used them to circumvent government-imposed credit controls. The restrictions are directed at domestic banks that have aggressively increased their interbank business in recent years, but foreign banks, already struggling in China, fear they will be caught in the crossfire.
…“They have not thought about the impact on foreign banks. We will just be collateral damage in their crackdown,” said a senior executive with a midsized foreign bank based in Shanghai…The head of a second midsized foreign bank expressed similar concerns.
…Interbank assets have more than doubled during the past three years, with banks disguising loans to companies as loans to other banks, thereby skirting ceilings on credit issuance and also evading tougher capital requirements.
Perhaps that is exactly what the Chinese have in mind.
