Chinese regulator CBIRC has issued a guideline called the No. 15 document to regulate financial institutions’ involvement in Local Government Financing Vehicles’ (LGFVs) debt financing activities, according to mainland media. While the document is not on its website, it bans banks from extending new working capital loans to LGFVs that still carry legacy government debt and bans them from funding LGFV projects that rely on fiscal subsidies alone for debt servicing, as per IFR. Also, local bank branches will now have to obtain approval from their provincial headquarters before lending to LGFVs. “We do not believe that the aim of the document is to cut off the LGFVs’ bank funding or to signal a higher government tolerance for LGFV default… We expect credit stress, including defaults on onshore trust product, bank bills and private placement notes to continue to emerge for these weak LGFVs,” said Zerlina Zeng, a senior analyst at CreditSights.