What are the risks of trust?

1. Moral hazard: In the past, China's trust and investment companies were used as the second finance of local governments or as investment and financing tools of industrial group companies, and the original regulatory authorities positioned them to engage in banking business, leaving many problems. 2. Risk contagion: Because trust products cross institutions and markets, a long chain of financial products is formed, involving many stakeholders, and it is easy to infect credit risks, market risks, operational risks, legal risks and policy risks generated by other entities and markets in a link to trust products. Of course, the risks of trust products can also be transmitted to other financial institutions and financial markets. 3. Policy and legal risks: First of all, some trust products are designed to evade supervision and make use of institutional defects to innovate, that is, to meet regulatory requirements such as project capital requirements, liquidity ratio and capital adequacy ratio, and to cope with macro-control. Secondly, some trust products are secured by land and wealth management income for credit enhancement. However, the imperfect provisions of policies and laws in these aspects can easily lead to invalid and illegal guarantees. 4. Risk management: Trust products issued by trust and investment companies have a wide range of investment fields and flexible investment methods, which require various professional technical knowledge and professional risk management capabilities, but they are often insufficiently prepared and inexperienced. 5. Insufficient liquidity: According to the Measures for the Administration of Trust and Investment Companies, a trust may not issue entrusted investment certificates, agency investment certificates, income certificates and securities custody instructions.