For China Banks, Two Roads Diverge
The government’s battle against leveraging will likely deepen the divide in China’s banking sector.
The interbank market, where banks and financial institutions trade assets and lend to each other, has been a key target in the country’s campaign to curb systemic risks and excesses. As interbank rates as a result jumped nearly 200 basis points from December through June, less-capitalized banks were less profitable during the first half of this year as they paid more for borrowed funds to make loans. Larger banks that sit on massive customer deposits, on the other hand, enjoyed higher margins from their being lenders in the interbank market.
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