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China regulator to tighten shadow banking supervision

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China will tighten supervision over the shadow banking sector, an official from the country's banking regulator said on Friday, amid concerns over unofficial lending by the country's financial institutions.

The official also told a news conference that the regulator will improve ways to manage deposit-to-loan ratios, an indicator of a bank's ability to absorb risk, and classify bad loans.

China's central bank pledged in March to improve its monitoring of the shadow banking sector, as part of an effort to make its data on bank credit and interest rates more accurate.

Read MoreChina shadow banking fears: Overblown or justified?

The government has been trying to rein in the shadow banking sector, which has grown rapidly in China since 2010, when banks began running up against limits on expanding loans through traditional channels.

The term shadow banking refers to any financing provided by a non-bank entity, such as credit guarantee firms, trust companies and other lenders, including pawn shops, for Chinese borrowers.

CBRC also plans to tighten control over provincial governments' financing and lending in property and industries suffering from over-supply, according to a press release handed out at the news conference.

Read MoreChina needs 'alternative' stimulus: IMF's Lipton

But China will not stop financing these industries immediately, it added.

"Currently, the economy, broadly speaking, is stable. But downward pressures are relatively significant which is a reflection of ... imperfect financing structures, inefficiencies in finance allocation and use and difficulties with SME (small and medium enterprises) financing," the statement said.

CBRC will improve credit asset securitization, and plans to maintain steady monetary policy and make minor adjustments as needed, it added. The regulator added that it will continue to oversee online financing to ensure it develops in a healthy way.

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