Banks Prioritize Liquidity

An analysis of Chinese banks’ 2016 financial results reveals a new preference for liquidity within both assets and liabilities. As the PBOC’s tightening campaign continues, banks have sharply reduced lending to non-bank financial institutions, while shifting more claims off-balance sheet via wealth management products. On the funding side, banks have relied upon more liquid but higher-cost negotiable certificates of deposit (NCDs), creating new pressures to roll over these funding instruments.

Posted August 1, 2017
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