China's banking regulator banned banks from funding coal and steel firms that are violating capacity cuts, the latest government effort to reduce banks' loans to industries that are struggling with overcapacity, Reuters reported Dec. 16.

The China Banking Regulatory Commission said banks should stop providing financial support to "zombie firms." Banks should also be more aware of the status of the coal and steel sectors and meet the funding demands of competitive firms.

The banking regulator also encouraged banks to finance mergers and restructurings in the steel and coal sectors.