PBOC Said to Tell Banks to Cancel Repos With Excessive Rates
- Some lenders said to have been set rate caps for such loans
- Seven-day repos recorded at 4.5% this week, highest since June
The People’s Bank of China is ordering banks to keep a lid on lending rates charged to one another as it seeks to prevent a pre-holiday surge in demand for funds leading to a cash crunch at a time of record capital outflows.
The monetary authority told some banks to cancel repurchase agreements that were conducted at interest rates it deemed excessive, according to people familiar with the matter, who asked not to be identified because the information is private. It also advised some institutions to keep rates on the short-term loans below certain levels, though not all parties were given the same limit, they said. Seven-day repos were conducted on Wednesday at 4.5 percent, the highest level since June and double the rate that the PBOC charges for similar term funds in its open-market operations.