China’s banks try to stay liquid

China’s banks try to stay liquid

As Chinese banks are set for a rigorous quarterly inspection of their books by the country’s major financial institution, the ructions in money markets as well as an explosion in inter-bank borrowing demonstrate how addicted they’re to risky methods of funding.

For the first time since it was launched the previous year, the Macro Prudential Assessment or MPA for short, will include off-balance sheet wealth management products for the purpose of giving authorities a better sense of potential risks to the country’s financial system.

Apparently, wealth management products, often linked to shadow banking, have demonstrated unbelievable surge for the last years even as the Chinese government tries to contain risks from a quick build-up in debt.

Banks, which fail the inspection, are expected to face stiff penalties, although the results aren’t publicly unveiled. The PBOC is going to conduct the MPA at the end of this month.

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