A $20 Trillion Problem: More Than Half Of China’s Banks Fail Central Bank Stress Test

In our latest look at the turmoil among China’s small and medium banks, which included not only the recent bailouts and nationalizations of Baoshang Bank , Bank of Jinzhou, China’s Heng Feng Bank, but also the two very troubling bank runs at China’s Henan Yichuan Rural Commercial Bank at the start of the month, and then more recently at Yingkou Coastal Bank. 

As we further explained, the reason why so many (for now) smaller Chinese banks have found themselves either getting bailed out or hit by bank runs, is that in a time when China’s interbank/repo rates have surged amid growing counterparty concerns, increasingly more banks have been forced to rely almost entirely on deposits to fund themselves, forcing them to hike their deposit rates to keep their funding levels stable.

 

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