Chinese banks risk Lehman-style collapse

Chinese banks are increasingly reliant on funding sources that Western peers used before the financial crisis, leading investors and analysts to warn that the country’s financial system could be vulnerable to a Lehman Brothers-style collapse, according to the Financial Times. Their use of volatile wholesale borrowing to fund balance sheets has particularly worried analysts, who warn that banks could be left without the stability of a broad retail deposit base and unable to raise cash when most needed. Concern over China’s rising debt has already become widespread among investors and policymakers. These concerns have focused on banks’ declining asset quality as defaults rise but many analysts believe the bigger risk comes from the liabilities carried on bank balance sheets.