China central bank presses banks to help with funds after interbank lending freezes: Caixin

Pedestrians walk past the People's Bank of China (PBOC) headquarters in Beijing, China.
Pedestrians walk past the People's Bank of China (PBOC) headquarters in Beijing, China.PHOTO: BLOOMBERG

SHANGHAI (REUTERS) - China's central bank stepped in to urge major commercial banks to lend to non-bank financial institutions on Thursday afternoon (Dec 15) after many suspended interbank operations amid tight liquidity conditions, Caixin reported on late on Thursday.

The People's Bank of China intervened to help institutions such as securities firms and fund managers after banks, including the big four state-owned banks, became reluctant to make loans, the financial magazine said, citing traders and institutional sources.

Caixin said that traders pointed to worsening sentiment among banks about market conditions and growing caution over interbank lending, especially after the US Federal Reserve triggered a sell-off in the bond futures market on Thursday by signalling more rate hikes in 2017.

Liquidity has become a major factor affecting the market after the central bank increased the cost of capital through open market operations in the past month, the magazine added.