Court Ruling Shows Bank’s Bet on Government Can Be Costly

* The ruling breaks financial institutions’ “blind” reliance on implicit local government debt guarantees and has symbolic significance, experts say

* Beijing has restricted local governments from providing loan guarantees to local companies in an effort to rein in hidden debt risks. But such practices have widely persisted

A recent court decision on a debt dispute between a major commercial bank and a Hunan government body sent another signal to Chinese lenders that governments may no longer be the last resort in defaults.