Banks Face Tougher Rules to Control Liquidity Risk
China’s banks face further curbs on their ability to raise funds from the interbank market as regulators continue their campaign to reduce the leverage of financial institutions and control risks in the financial system.
The China Banking Regulatory Commission (CBRC) has published draft rules on how banks should manage their liquidity risks, which analysts say will force lenders to reduce their dependence on borrowing from the interbank market. The market is the main source of short-term funding for financial institutions, but it also carries higher risks because of the potential mismatch created between a bank’s liabilities and its assets.
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