Chinese banks to curtail bill financing to prevent risks
Some Chinese banks have tightened risk management of short-term lending known as bill financing amid increased regulatory scrutiny, according to people familiar with the matter. An Industrial & Commercial Bank of China Ltd. branch has suspended such lending for iron ore, steel trading and coal trading companies, and limited transactions to select banks, one of the people said, declining to be identified as he isn't authorized to speak with media. A joint-stock bank has also temporarily halted bill financing, which many smaller firms rely on to pay operating costs, a second person said. The funds usually must be repaid within several months.
The China Banking Regulatory Commission issued a notice earlier this month asking banks to review bill-financing businesses for violations and risks, two people familiar with the matter said.
That adds to pressure on liquidity in the financial system before Lunar New Year holidays next month. While borrowing costs in China remain near decade lows, yields in the bond market have jumped this week as capital outflows amid the yuan's tumble crimp cash.