China Asks Some Banks to Limit Backing for Offshore LGFV Bonds
- Regulatory move targets use of standby letters of credit
- Authorities are aiming to curb debt issued by weak LGFVs
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Chinese regulators told some of the country’s lenders to limit their use of a repayment-support mechanism that has backed offshore bond issuance by local government financing vehicles, according to people familiar with the matter.
At least four commercial banks, including China Bohai Bank Co. and Hengfeng Bank Co., were asked last week to limit use of the so-called standby letter of credit, or SBLC, which is a pledge by a lender to repay the debt if the issuer can’t, the people said, asking not to be identified as the matter is private.