China's banking regulator has ordered banks to conduct a thorough risk assessment of loans made to credit guarantee firms in the country and step up checks on the sector, sources who have seen the documents told Reuters on Monday.

Sources said the China Banking Regulatory Commission was cracking down on the credit guarantee industry after a series of incidents which exposed how these firms were misusing clients' funds as well as being involved in shadow banking businesses.

In a separate circular, Shanghai-based banks were ordered to conduct a thorough risk review of loans to all major customers and loans by carefully reassessing the value of their collateral, as well as identifying their source of repayments.

Agencies - China Daily