Abstract: The implementation of No.43 Document of the State Council has provided a quasi-natural experimental scenario for the researches on the governance effect of local debts. The findings show that local debt governance has no significant impact on banks’ financial assets, but it has increased total bank loans, personal loans and corporate loans, which is conductive to the“shifting from fictitious assets to real assets”of bank credit funds. Local debt governance can significantly increase bank loans to real industries, but not increase bank loans to the non-real industries or the construction industry. The findings of a mechanism test indicate that local debt governance can indirectly affect the allocation of bank credit funds by reducing personal and corporate financing costs. The result of further research shows that after the implementation of No.43 Document, banks with higher asset quality are inclined to provide more loans to enterprises and the real industries, and banks with lower asset quality are inclined to provide more personal loans. The bank size can strengthen the role of local debt governance in promoting bank loan growth. Therefore, in order to facilitate bank credit funds “shifting from fictitious assets to real assets”, it is necessary to improve the level of local debt management, strengthen the supervision and guidance of banking business, and enhance risk management, so as to ensure the quality of bank assets.

Key words: debt governance, bank credit, interest rates, DID