Economics
China Traders Reassess Counterparties After Bank Seizure
- Lenders grow reluctant in accepting risky notes as collateral
- Weaker firms may face rising cost for new bond sales: BE
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Bond traders in China are rethinking counterparty risks as shock waves from a government takeover of a bank ripple through the country’s financial markets.
It’s now getting harder for corporate bonds to be accepted as collateral for repo financing as lenders increasingly demand top quality bonds such as Chinese sovereign bills and policy bank notes as pledges. Traders are having second thoughts on taking even AAA rated short-term bank debt as security in the wake of last month’s seizure of Baoshang Bank Co.