China's central bank will take into account off-balance sheet financing at commercial banks to assess their overall financial health, three sources with direct knowledge of the matter said late on Tuesday.
The People's Bank of China will make the change to its so-called Macro Prudential Assessment (MPA) risk-tool to broaden its regulatory oversight to include wealth management products often sold by banks and not counted on their balance sheets, the sources told Reuters.
The MPA assessment framework already included checks of loans, bond investments, equity investments and buybacks of financial assets sold, and deposits at non-financial institutions.
The move marks another step in the PBOC's efforts to control rising leverage in the nation's financial system and underscored worries among analysts that unsustainable credit could hit an already slowing economy hard.
The sources said the latest adjustment to the MPA system, first introduced to examine banks' capital adequacy ratios, will create additional restrictions to curb rising debt levels in the country's financial system.
Zhou Hao, senior emerging market economist at Commerzbank in Singapore, wrote in a note that the new rules would require banks to reserve more capital.