China will strengthen supervision of new financial products, particularly ones with complex structures and high leverage, to combat potential risks to the banking sector, the industry’s regulator said.

Shang Fulin, head of the China Banking Regulatory Commission (CBRC), said it is necessary to contain hidden and rising risks from shadow banking and banks’ cooperative businesses.

“We should learn the lessons from the international financial crisis and guard against financial innovation (products) with overly-complex structures, high associations and leverages and lack of transparency,” Shang wrote in an article for the latest issue of Qiushi Magazine, run by China’s Communist Party.

Analysts regard shadow banking as a growing risk to China’s financial system. Shadow banking traditionally includes activities such as pawn-broking and peer-to-peer lending, but now extends to vast off-balance sheet guarantees and loans in the banking system.

“We should ensure there are no systemic and regional financial risks in the area of financial innovation,” Shang wrote in Qiushi, which means “Seeking Truth” in English.

Banks should also make clear their risk control and prevention responsibilities when cooperating with other parties – including brokers, funds, insurance and trust companies – to issue financial products, Shang added.

The banking regulator had earlier warned banks to intensify checks on the underlying assets of a range of wealth management products to strengthen risk controls in the sector.

(Reporting by Xiaoyi Shao and Nick Edwards; Editing by Richard Borsuk)