China's cabinet has issued new rules to strengthen regulation of the shadow-bank lending that has helped fuel an explosion in debt levels since 2008, in the latest effort to address growing financial risks, sources told Reuters on Monday.
The wide-ranging new rules issued by the State Council, China's cabinet, say that shadow banking is a "beneficial" and "inevitable" consequence of financial development and provides an official definition of the term, according to a copy obtained by Reuters.
The regulations contain new restrictions on banks' cooperation with trust companies, securities brokerages and other intermediaries with whom banks have cooperated in order to carry out off-balance sheet business.
(Read more: Inside China's $6 trillion shadow banking system)
Authorities also attempt to address the problem of banks' exploiting regulatory loopholes by clarifying the responsibilities of various regulators, the People's Bank of China, the China Banking Regulatory Commission, and the China Securities Regulatory Commission.
The rules also address internet finance, micro-lending, and informal lending by friends and family members.