China Orders Interbank Lending Curbs to Quell Shadow Debt
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The Chinese government ordered lenders to curb interbank borrowing in the latest effort to check growth in the informal shadow-banking industry that threatens to undermine the nation’s financial system.
A commercial bank should limit its interbank borrowing to less than a third of its liabilities, while its lending to another financial firm shouldn’t exceed 50 percent of its Tier 1 capital, according to a statement on the People’s Bank of China’s website yesterday. Financial institutions need to better manage the maturity of interbank funding and control liquidity risks, the PBOC said.