Central bank mulls supporting foreign lenders

The People’s Bank of China (PBOC) may introduce a facility to extend cash to foreign banks in China on a temporary basis, the Wall Street Journal reported. The central bank has inquired about foreign-owned banks’ financial situation in preparation for the possible launch of a mechanism along the lines of the Term Auction Facility created by the US Federal Reserve in December 2007 to keep financial institutions solvent in the short term. Chinese banks have been reluctant to provide loans to foreign-owned lenders on the mainland since the implosion of Lehman Brothers in September. About 25 foreign banks operate in China through holding companies and are largely cut off from their parent companies by cross-border capital-flow restrictions.