Bankers Implement Strictest Liquidity Controls Ever, Tell Branches “Protect Yourself”
Bankers are reigning in lending and hoarding capital as banks’ cost of capital exceeds loan rates. Bankers are even delaying loan disbursement unless customers accept punitive hikes in loan costs. Banks are hoarding capital, with tight credit expected in June (MPA assessment), July (WMPs coming due) and even as far out as September (quarter end).
The article below interviews bank president Mr. Zhang, who has approved 2 billion in loans but refuses to release the funds. He tells the customers wait a little longer, but the funds are never coming unless the customer takes his hint that the cost of funds will soar.
Zhang is a member of the assets of 200 billion yuan level of the city branch of a branch of the vice president, in charge of corporate finance. It is his duty to maintain a good group of companies with a high profile contribution, but now that the loan business has given way to the second quarter of the macro-prudential assessment system (MPA) Has been dubbed the “debt shortage” of the tight liquidity trend, so that the price of capital is steep rise in the spread, so that the head office “under the death order” liquidity control.
“Bringing in capital is the top priority.” Zhang told the first financial reporter, the head office has just released what they call the “history’s most stringent” liquidity control program. All business units, all branches should defend themselves.
Bankers are refusing to lend to big real estate borrowers even if loans are approved. They’re also telling them they can rollover their debts, but after collecting payments, refuse to lend. Later in the article, Zhang says he’s received a loan quota and cannot exceed it. Effectively he cannot loan, and if the number drops, he needs to find some way to raise capital or cut lending.
If there are still funding gaps, but have to give the loan, how to do? Zhang is not frustrated to tell the first financial journalists, in accordance with the spirit of the head office, the cost of this loan will be “punitive” to add 200 basis points.
“If the cost bank capital is 5%, and this goes up again by 200 basis points to 7%, now a one-year loan was 4.35%, even if rate is hiked 50% I’m still losing money.”
SHIBOR rose higher on Tuesday, climbing above the prime rate, and it’s now approaching the central bank’s 1-year rate.
Money isn’t very tight at the moment, but bankers are hoarding capital in preparation for the MPA in June, and expect tight conditions in July and again at the end of September.
Originally, Xiaopeng they are only in the row of assets and liabilities positions under the baton, ahead of hoarding money. In other words, the tight is not the moment, but for the future will be “lack of food” is expected – 6 at the end of the year to deal with the MPA assessment, in July Xiaopeng where the bank has a group of financial maturity, the end of September liquidity Gap is not small.
You can imagine, to each point in time assessment, overnight, 7 days the price of the species is certainly more cost-effective, or even grab not, of course, Xiao Peng they will now have the first medium-term funds locked up.
And all this foreshadowing, that is, the first two years, with a number of small and medium banks as the backbone of the expansion of the table.
Waterfall is coming out. A joint-stock bank strategy researcher told the first financial journalists, from a number of bank off-balance sheet assets and liabilities, due to the existence of time mismatch, when the lever from the capital side, and the asset side “continued leverage” and strong Of the inertia, so the industry “shrink table” two pressure, this period will be mismatched.
It is also worth noting that “some banks have a long period of long-term bond assets Fukui, because the report is still in the ‘hold expired’ item, the outside can not be observed.” For such assets, banks also need funds Continued
“To talk about it, or just against the pressure, or asset quality problems.” “Debt shortage”, the funds from the tight, watching the financial management (mainly refers to the non-guaranteed financial management) is about to expire, South China an industry business developed a small bank head office management said that this is he will face the “chest broken stone.”
With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China’s bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms’ stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks’ cost of borrowing beyond the rate they charge customers for loans for the first time in history.