a commercial bank in Beijing, China, March 30, 2016. Photo: Reuters/Kim Kyung-Hoon

The China Banking Regulatory Commission released strict new rules for entrusted loans in commercial banks, which has basically made the use of entrusted loan funds off-limits, China News Service reported.

According to the new directives, entrusted loan funds cannot be used for investment in bonds, futures, financial derivatives and asset management products.

Nor can they be used as registered capital or capital verification, or for equity investment or capital increase.

The rule stipulates that the entrusted loan business is the principal-agent business of commercial banks.

Banks, as trustees, shall not participate in the decision-making of the use of entrusted loans, or provide various forms of guarantee.

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