THE country’s banking and insurance regulator has issued an urgent notice to check potential financial risks associated with provincial-level debt clearers, targeting fake deals to help banks doctor their books, three sources said late Monday.

Some provincial governments have rushed to set up asset management companies (AMCs) in recent months after China relaxed rules to allow each province to set up two local AMCs to handle rising bad debt nationwide.

But the bad debt market is still dominated by the four largest AMCs — Huarong, Cinda, Great Wall and Orient, set up in 1999 to clear up bad loans at State-owned banks.

The regulator will conduct “special investigations” into business activities of local AMCs to find out the cause of risks and measures to deal with risk, according to the sources.

Local AMCs were required to report their operations of 2017 and the first quarter of this year, including their disposal of nonperforming assets and debt restructuring, the sources said.

The regulator will focus on possible falsified bad-loan dealings between banks and AMCs to “whitewash” their financial statements, they said.

One source said the regulator was drafting guidelines on AMCs to regulate their businesses and close possible loopholes.

The country’s regulators also said Monday that they will closely monitor interest rates charged by private lenders, securities companies and futures firms to crack down on illegal fundraising.

While incidents of illegal fundraising in China are decreasing, the situation remains severe, according to a release issued jointly by several regulators at a Beijing news conference.

China’s supreme court said illegal fundraising severely damages market order and national financial security, according to the release.

The People’s Bank of China said it will continue to fend off risks from Internet financing, adding that all platforms offering initial coin offerings (ICOs) and bitcoin exchanges have been safely closed down.

Financing intermediaries, online finance platforms, real estate and agriculture are all major areas of illegal fundraising, the statement said.

The housing ministry said it will improve its monitoring of the property market and increase a crackdown on illegal activities by real estate developers and intermediaries.(SD-Agencies)