Short-term borrowing costs between Chinese banks dropped to their lowest levels in a decade, as regulators sought to reassure markets that were spooked by the government takeover of a troubled bank last month, said the Wall Street Journal.
Overnight Shibor, a measure of one-day unsecured bank lending rates, fell to 0.99% on Wednesday, its lowest since 2009. Known as the Shanghai interbank offered rate, it is the average of interbank lending rates reported by a group of banks with high credit ratings.
Shibor is used by some banks as a reference rate for short-term commercial loans. Another interbank rate measure, the one-day repo rate, dropped to 1.09% on Tuesday from 2.23% at the end of last month.
The shift in interbank rates appears to be related to a series of moves by the People’s Bank of China to pump liquidity into the money market following the state takeover of a struggling small bank, Baoshang Bank Co., in the northern province of Inner Mongolia, reported the Wall Street Journal. The takeover unnerved the financial sector and sent borrowing costs in repo markets higher for smaller banks.