Contagion Risks Rise as China Banks Fund Each Others’ Loans
- ‘The pace of the development is concerning,’ S&P’s Liao says
- Wholesale funding 34% of smaller banks financing, Moody’s says
Contagion Risks Rise for Chinese Banks
This article is for subscribers only.
China’s smaller banks have never been more reliant on each other for funding, prompting rating companies to warn of contagion risks in any crisis.
Wholesale funds, including those raised in the interbank market, accounted for a record 34 percent of small- and medium-sized bank financing as of June 30, compared with 29 percent on Jan. 31 last year, Moody’s Investors Service estimated in an Aug. 29 note that analyzed central bank data. Shanghai Pudong Development Bank Co.’s first-half earnings showed its short-term borrowings and repurchase agreements surged by 75 percent in the past three years, while its consumer deposits rose just 24 percent.