BEIJING/HONG KONG, June 28 (Reuters) - At the height of China's cash crunch this month, the banking regulator reiterated orders to financial institutions to report all funds raised for local governments, highlighting Beijing's concern with rapid credit growth in the world's second-biggest economy.
According to a document issued on June 21 and seen by Reuters on Friday, the China Banking Regulatory Commission informed financial institutions they need to report such funds, including cash raised from sales of wealth management products.
The CBRC was not immediately available for comment. It had first issued such a directive in March.
Its reminder came as China's central bank helped engineer a record squeeze in the Chinese money market last week, in what analysts said was an attempt to slow credit expansion and punish banks making risky loans supported by sales of wealth products.
Interbank rates, at which banks lend to one another, shot to as high as 28 percent at the peak of the crunch. They have eased sharply this week, but remain well above their usual levels. .
Debt is shaping up to be one of China's most pressing financial problems. Many local governments embarked on spending sprees on big infrastructure projects after the state handed out cash in the wake of the 2008/09 financial crisis to pump up the economy.
A report from China's National Audit office earlier this month showed the total debt at 36 local governments audited had risen 13 percent to stand at 3.85 trillion yuan ($626.12 billion) at the end of 2012 from two years before.
Underscoring Beijing's worries about the potential risks from a surge in sales of wealth management products, the June 21 notice showed the regulator added a new requirement for banks to report cash raised from such sales.
Fitch Ratings last week estimated that more than 1.5 trillion yuan ($244 billion) in wealth management products will mature in the last 10 days of June.
Financial institutions are also required to report money raised for local governments through bank loans, corporate bonds, medium-and short-term notes and trust loans. ($1 = 6.1490 Chinese yuan)
(Reporting by Weihao Cao, Zhao Hongmei, Zhang Shengnan and Koh Gui Qing; Editing by Jonathan Standing & Kim Coghill)
Keywords: CHINA ECONOMY/BANKS RULES
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