With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China’s bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms’ stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks’ cost of borrowing beyond the rate they charge customers for loans for the first time in history.
“This is probably just the beginning” and interbank funding costs will rise further amid the drive to reduce leverage, said Xu Hanfei, chief fixed-income analyst at China Merchants Securities Co. in Shanghai.
Full article: “This Is Probably Just The Beginning” – Chinese Banks Are In Big Trouble (ZeroHedge)