China’s securities regulator convened a meeting on Sunday asking big brokerages and funds to support their smaller peers, following the recent government take over of Baoshang Bank, said the Wall Street Journal.
The meeting summary cited rising risk aversion in money markets after defaults in the bond repurchase market. Some interbank lending rates have moved sharply higher in recent weeks.
China’s short-term lending market for banks and other financial institutions has for years operated under the assumption that Beijing wouldn’t allow big losses in the event of defaults or insolvencies, said the WSJ.
That confidence has been shaken by regulators’ unusual public takeover of Baoshang Bank and the even more unusual public admission by the central bank that not all of the bank’s liabilities would necessarily be guaranteed.