The mirror that China's central bank is holding up in front of the country's banks is providing uncomfortable viewing. Too many banks are reliant on short-term funding markets to survive, and a shake up in the sector is needed.
The central bank has engineered the current cash crunch as a warning to overextended banks but a growing concern, analysts say, is of a miscalculation that sets off a full-blown crisis.
The central bank's determination to rein in rapid credit growth has sent interbank lending rates soaring to record highs, sparking panic and swirling speculation that banks are defaulting on deals as they scramble to secure short-term funds.
Analysts suspect a particular target of the central bank is non-bank lending, or shadow banking, which has boomed in recent years.
"A more structural factor behind this squeeze is that banks are using liquidity tools to support their long-term business. That should be a strong warning sign for the industry," says Hu Bin, senior China banking analyst at Moody's Investor Service in Hong Kong.
In particular, Hu says, some banks are relying on short-term interbank borrowing to come up with the cash necessary to meet repayment obligations on high-yielding investment products, a similar reliance that caused problems for some Western banks during the global financial crisis.
"Everyone in the system is impacted by this, even all the way at the top in terms of the largest banks in the country," says Charlene Chu, senior director at Fitch Ratings.
"It's certainly a lot more swift, and arguably more effective in reining in the growth of shadow credit. But it does create a lot of repayment risk within the system between financial institutions, and there is potential for unintended consequences."
Overall financing in the Chinese economy increased 52 percent in the first five months of 2013 compared to the same period last year, which analysts say was led by a surge in shadow banking activity and wealth management products that promised investors high returns.
Fitch estimated that total sales of wealth management products reached 13 trillion yuan by the end of 2012, more than 16 percent of total bank deposits.
More immediately, it estimated that more than 1.5 trillion yuan in wealth management products will mature in the last 10 days of June. That may explain the scramble by some banks to secure short-term funds, which are often used to meet repayment obligations.
Wealth product boom
Banks have created wealth products by packaging various assets like money market deposits, corporate bonds and informally securitised loans.
Many of these products are held off-balance-sheet, which allows banks to meet state-mandated loan-to-deposit ratios and still create new loans.
Many are also based on long-dated assets, so when payouts are due to investors, banks often raise cash by issuing new products - or by borrowing in the interbank market.
Authorities have tried to regulate the shadow banking sector and in particular, these wealth management products, but with little impact on the sector's growth. Now the central bank is playing hard ball with the banks by refusing to provide liquidity to the money markets, which earlier this month drove the interest rate for some banks to borrow short-term funds to 25 percent or higher.
"The critical question now is how long is this going to go on," said Fitch's Chu on the sidelines of a conference in Sydney. "If this is going on for quite a while and we really start to get a shake out of institutions, the question is what potentially would they do to try and address some of that and would consolidation be on the radar screen."
Smaller banks, whose less extensive branch networks give them less access to customer deposits, are especially vulnerable to the credit squeeze.
At the end of 2012, interbank assets accounted for 25 percent of the total assets of mid-sized banks examined by Michael Werner, senior bank analyst at Bernstein Research. That compared with 15 percent in 2009, he said in a report this month.
A wave of defaults on interbank loans, therefore, could seriously threaten the solvency of smaller banks, he said.
"Speaking with a lot of Chinese banks, you often hear, 'this is not a risk because these loans always get repaid.' I think that type of mentality is going to get thrown out the door," Werner said.
At the end of 2012, mid-sized Minsheng Bank's interbank funding of less than one year accounted for 29 percent of its non-equity liabilities, the highest among the Chinese banks that Bernstein covers.
Werner says other mid-sized banks like Everbright Bank, Industrial Bank, and Ping An Bank are also highly dependent on short-term borrowing.
To be sure, the level of reliance on short-term funding is nowhere near the levels of some Western banks before the global credit crunch. Short-term funding may have accounted for more than half of such liabilities at Lehman Brothers at the end of 2007, a research paper by staff economists at the Federal Reserve Bank of New York showed in 2010. Lehman's collapse set off the global financial tsunami.
Reform
Banks that find themselves overly reliant on short-term funding face a choice: They can shrink their balance sheets so that more assets are funded by deposits, or they find other more stable funding sources.
If they choose the latter, equity and long-term debt are possibilities. But resorting to these more expensive funding sources would pressure banks' net interest margins, hurting profitability.
China's central bank appears to prefer deleveraging.
"The central bank appears to be determined to force banks and other financial institutions, such as funds, brokerages and asset managers, to deleverage," says a trader at a major Chinese state-owned bank in Shanghai.
"That hardline stance suits the recent government policy of clamping down on non-essential businesses by financial institutions, such as shadow banking, wealth management, trust operations and even arbitrage," he says.
An article in a China central-bank backed newspaper called the Financial Times suggested the cash crunch and a rumoured default had provided impetus for China to accelerate the rollout of a new deposit insurance system.
Such a system would eliminate the need for authorities to bail out individual banks by ensuring that depositors were protected even if a bank found itself short of funds.
Another China central bank worry; companies push into lending
By Aileen Wang, Lu Jianxin and Pete Sweeney
Chinese companies are getting more creative in the business of money lending as they struggle to keep profits ticking over in a cooling economy, raising concerns they are adding to the mountain of debt risks building in the world's No.2 economy.
Big state companies in industries struggling with overcapacity but with easy access to credit are borrowing funds, not to invest in their business but to lend to smaller firms sometimes at several times the official interest rate, part of an informal lending market in China that authorities are taking aim at.
China's central bank increased pressure on banks to rein in such informal lending and speculative trading earlier this month in money markets, letting short-term interest rates spike to extraordinary levels.
In the $3.7 trillion “shadow banking” market, the fastest growing area is in the so-called entrusted loans, which are arranged by banks on the companies' behalf, and in bankers' acceptance notes, tradable securities that give a steady flow of cash.
Issuance of entrusted loans and bankers' acceptance notes has more than doubled to 1.6 trillion yuan ($261 billion) in the first four months of this year from 636 billion yuan a year ago.
"Can we use the money to expand production? Definitely not," says a deputy general manager at a state-owned steel firm in the eastern Shandong province, speaking on condition of anonymity.
"We will lose more if we produce more. We can only rely on other channels," he adds, noting the firm loses an average of 100 to 200 yuan per metric tonne (1.1023 tonnes) of steel sold.
China's economic growth is widely expected to slow further in the current quarter as exporters struggle with weak global markets, making lending money an increasingly attractive business option.
But there are concerns that some of the money is going into areas the government would rather it did not, for example real estate speculation, raising the risk of it turning bad while not helping the economy out of its current slowdown.
Indeed, debt is shaping up to be China's biggest financial problem. The cabinet has said it would control the flow of new money into industries struggling with overcapacity.
Beijing worries the shadow banking market is creating asset-price bubbles, and the central bank has tried to put a barrier in the way of it in recent weeks by declining to inject major funds into money markets.
The shadow banking system has arisen because main stream banking is focused on the needs of big state-owned enterprises.
Ratings agency S&P has estimated that outstanding shadow banking credit totalled $3.7 trillion by the end of 2012, equal to 44 percent of GDP.
Fitch has put it at about 60 percent, saying "torrid growth" has made the total of all forms of credit, including regular lending, shadow and hidden underground lending, as much as 200 percent of GDP.
"This is a very, very big problem for the economy," says Wei Yao, China economist at Societe Generale in Hong Kong.
"The existence of all these arbitrage efforts shows that in the real economy, there are few opportunities. You've limited all the opportunities for real growth, then you open a window in the financial markets; of course everyone goes there!"
New techniques
With entrusted loans, a company provides the funds, but to circumvent a ban on direct lending to other firms, it designates a commercial bank to lend the money to a specific borrower.
The lender stipulates the amount, tenor, and rate of the loan, while the banks earn fees from both sides without the loans showing up on their balance sheets.
The average monthly amount of new entrusted loans was 179 billion yuan in the first four months of 2013, up from an average of 106 billion yuan a month last year.
The steel company manager says he borrows from banks around the 6 percent official rate, then issues an entrusted loan to a borrower at up to twice that rate.
The general manager of a local government-controlled glass company in the northern province of Hebei says his company has increased the use of such practices as business slowed, lending about 30 to 40 million yuan so far this year at around 6 to 7 percent mainly to related firms.
Some private companies are also cashing in. Zhejiang Longsheng Group Co Ltd, a specialty chemicals maker based near Shanghai, detailed 50 entrusted loans worth three billion yuan outstanding in its 2012 annual report.
The company lent to subsidiaries at rates of 6 to 7 percent, but unrelated companies were charged as much as 25 percent. It said one of the loans, with a rate of 20 percent, would be rolled over as the borrower had difficulty repaying it.
Companies are also buying bank acceptance notes, transferable bills issued by other banks that can be sold for cash. These companies sell the bills and use part of the cash raised to make loans and the rest to buy more bills, thus ensuring a continuous churn of funds and income.
The average monthly amount of bank acceptance bills issued so far this year has more than doubled to 222.8 billion yuan compared with an average of 87.5 billion yuan for all of 2012.
Real estate a worry
A chief worry is that the newly generated money is finding its way into speculative real estate, complicating China's three-year fight against a property bubble. New home prices in May rose from a year earlier at their fastest pace in more than two years.
An official at the statistics department of the central bank's Dalian office, who asked not to be identified, says that among all the entrusted loans issued in 2012 in the northeastern city, about 30 percent went to the real estate sector at an average interest rate of 12 percent.
Another official at the central bank's Chongqing office says finance companies and credit guarantee firms affiliated to state-owned enterprises are major issuers of such loans.
"In our city, there is an estimated 50 percent or more of such loans flowing into the property sector and local government financing vehicles," says the official. "The injection of entrusted loans partially helps pull down the bad loan ratio in the property sector and local financing firms. But the risks keep brewing there, and could become acute if the economy slows further."
China credit squeeze challenges ‘age of ambiguity’
By John Foley
Silence has been good policy for China. The authorities’ penchant for relying on the unsaid, especially when it comes to financial obligations, has been a useful tool for channelling funding to banks and companies. But recent ructions in the interbank market, where lenders turn for short-term funding, suggest the age of ambiguity may soon have to end.
The 25 percent rate some banks were charged for one-day funding on June 21 is a pretty clear signal of distress. Yet, the central bank’s intentions remain murky. Even if the People’s Bank of China comes to the rescue by directly doling out liquidity to lenders who need it, it doesn’t need to say it did so for one month. Markets are left hoping for the best, or fearing the worst.
That’s not the only area where China has benefited from shades of grey. Despite the absence of clear rules, most investors believe lenders can’t fail, and that bank deposits are all backstopped by the state. Savers are thus happy to leave their money in the bank, where it has helped fuel China’s rapid economic growth. China’s banks have lent more than $1.5 trillion to local governments via funding vehicles, assuming - though it was never said out loud - that the authorities would help if the loans went bad. They have also extended credit using short-term wealth management products, which were sold to customers who expect to be paid back in full.
In a financial crisis, however, ambiguity can be dangerous. Banks depend on their savers’ trust, and social media can undermine that in seconds. Bank of China was forced to use its Weibo microblog to deny reports that it had missed a loan payment on June 20. For a smaller lender, that could have been disastrous. Censorship is an option for nervous watchdogs, but barring the mention of a bank might only make a bad situation worse.
The more complex China’s financial markets become, the more important it is that authorities change their opaque ways. One option is to bring in clear rules to deal with a market failure, including resolution schemes for failing banks. Alternatively, admit that all banks and depositors are too important to fail, and deal with the resulting moral hazard. Though neither is attractive, uncertainty and uncontrolled rumour are worse.
整顿势在必行
“钱荒”暴露短期融资风险
作者：Gabriel Wildau
中国央行竖在该国银行面前的镜子映射出一副让人不安的画面。有过多的银行靠短期融资市场维生，这个领域亟需一次“大地震”。
央行策划了当前的“钱荒”，作为对借款过度、资金周转不灵的银行的警告，但分析师称，更多的忧虑在于担心央行出现误判，从而引爆全面的危机。
央行遏制信贷快速扩张的决心导致银行间同业拆借利率飙升至历史高位，引发市场恐慌。且市场猜测由于各家银行争相锁定短期资金，中资银行间已出现资金违约。
分析师揣测央行“钱荒”针对的特定目标是非银行贷款，即近几年来蓬勃发展的影子银行。
穆迪投资者服务公司驻香港的中国银行高级分析师胡斌表示：“资金紧张背后的一个结构性因素是，银行使用流动性工具支持其长期业务。这对银行业来说是一个明显的预警信号。”
胡斌指出，特别是一些银行依赖短期银行间贷款，以获得履行高收益投资产品偿付义务所需的现金，这种对短期贷款的依赖与全球金融危机期间致使一些西方国家银行陷入困境的原因相仿。
惠誉的高级董事朱夏莲称：“银行系统中的各方都受到了冲击，即便是处在系统金字塔顶端的中国最大的那些银行。”
“用‘钱荒’来遏制影子银行信贷的增长，无疑是较为快速并且可以说是较为有效的方法。但这会引发银行系统中金融机构之间的大量偿债风险，并可能产生意想不到的后果。”
2013年前5个月，中国社会融资总量较上年同期增长52%。而据分析师称，这受到了影子银行活动激增以及承诺较高回报率的理财产品的推动。
据惠誉估计，截至2012年底，中国理财产品的规模达到13万亿元人民币，较银行存款总量高出16%。
更为紧迫的是，惠誉估计，在今年6月份的最后10天，将有超过1.5万亿元人民币的理财产品到期。这可能是导致一些银行急于获取短期资金的原因，因为短期资金通常被用于履行偿债义务。
理财产品热潮
银行通过将货币市场存款、公司债券和非正规证券化的贷款等各种资产打包，创造出理财产品。
许多此类产品被列为表外项目，使得银行能够在达到国家强制规定的贷存比的同时，继续发放新的贷款。
很多理财产品也以期限较长的资产为基础，因此当产品偿付到期时，银行常常会通过发行新产品，或是从银行间市场借款，来筹集偿付现金。
有关部门曾试图监管影子银行领域，尤其是理财产品，但这几乎未对该领域的增长产生什么影响。目前，中国央行正通过拒绝向货币市场提供流动性的做法，对银行“硬来”，而这使得一些银行融入短期资金的利率在本周飙升至25%或更高。
“现在的关键问题是这（钱荒）将持续多久。”惠誉的朱夏莲在悉尼所举办大会的会外活动中表示，“如果这持续较长一段时间并且我们确实开始看到金融机构进行重大调整，则问题在于它们可能采取什么举措来试图解决部分问题，以及行业整合是否将会发生。”
小型银行由于分支机构网络较小而只能吸收到有限的客户存款，所以尤其容易受到信贷紧缩的冲击。
伯恩斯坦研究公司高级银行分析师迈克尔•韦尔纳（Michael Werner）在本月发布的一份报告中称，截至2012年底，银行间资产在中型银行总资产中的占比达到25%，该比重在2009年为15%。
他因此认为，银行间贷款如果发生一波违约潮，则恐将严重威胁到小型银行的偿付能力。
韦尔纳称：“在与中国的许多银行交流时，经常听到它们这么说，‘这不是风险，因为这些贷款总会被偿还的’。我觉得这种想法将会被打破。”
截至2012年底，中型规模的民生银行的一年期以下银行间市场融资额占该行非权益类负债的29%，为伯恩斯坦研究公司所覆盖的中资银行中的最高水平。
韦尔纳指出，诸如光大银行、兴业银行和平安银行等其他中型银行，也高度依赖短期拆借。
中资银行对短期融资的依赖度无疑较一些西方国家银行在全球信贷危机前的水平还有一段距离。据纽约联邦储备银行的经济学家在2010年发布的一份研究报告显示，雷曼兄弟截至2007年底的短期融资可能占到了非权益类负债的一半以上，而雷曼兄弟的倒闭成为引发全球金融海啸的导火索。
改革
过度依赖短期融资的银行面临着以下两个选择：收缩自己的资产负债表规模，让存款为更多资产提供资金支持，或是找寻其他更稳定的融资来源。
如果选择后者，那么股票和长期债务是可能的解决之道。但是利用此类成本更高的融资来源，将给银行的净利差带来下行压力，从而损害盈利能力。
中国央行似乎更偏好于去杠杆化的做法。
上海一家主要中资国有银行的交易员称：“央行似乎决心强制银行和其他金融机构，如基金、经纪公司和资产管理公司，降低杠杆。”
他补充道：“这一强硬的立场与政府近来严格限制金融机构非核心业务的政策相符，非核心业务就包括影子银行、理财、信托，甚至套利业务。”
得到中国央行支持的新闻报刊《金融时报》所刊载的一篇文章称，资金紧张和违约传言能刺激中国加速出台新的存款保险制度。
该制度将通过确保在银行资金短缺时保护储户的利益，使当局无需出手援助个别银行。
央行另一心病；企业拥入放贷市场
作者：Aileen Wang、Lu Jianxin，Pete Sweeney
中国企业为了在经济降温期努力保持盈利性，正在放贷业务方面变得越来越富创意，这引发了市场对于该全球第二大经济体的大量债务风险可能进一步加重的担忧。
身处产能过剩行业但具有良好信贷渠道的大型国有企业不断借入资金，并非为了投资本业，而是以数倍于官方利率的水平出借给小型企业——这就是有关部门目前力图严格限制的非正式贷款市场的一部分。
中国央行上周加大对银行的施压，以遏制货币市场上猖獗的非正式借贷和投机交易，造成短期利率飙升至高位。
在规模达3.7万亿美元的所谓影子银行市场中，增长最块的领域是所谓的委托贷款，即由银行作为企业的中介，采用银行承兑汇票的形式代为发放贷款。银行承兑汇票是特殊的有价证券，能使企业获得稳定的现金流。
在今年前4个月中，委托贷款和银行承兑汇票的发放量较去年同期的6360亿元人民币增长了一倍以上，达到1.6万亿元人民币（2610亿美元）。
位于山东的一家国有钢铁公司的不愿具名的副总经理表示：“我们是否能把资金用于扩大产能？绝对不行。”
他补充道：“生产越多，我们的损失就越大。我们只能另谋赚钱的渠道。”他透露，该公司每出售1公吨（1.1023短吨）的钢材，平均亏损100-200元人民币。
随着出口商在疲弱的全球市场环境下处境艰难，人们普遍预期中国的经济增长将在当前季度进一步放缓，这使得放贷业务成为一个日益诱人的商业出路。
但是，人们也担忧这会造成一部分资金涌入政府不希望其进入的市场，比方说房地产炒作。这对于中国经济走出目前的低迷毫无帮助，反而会加大经济状况恶化的风险。
事实上，债务正在演变成中国最大的经济难题。中国政府已表示，将控制新增信贷资金流入产能过剩的行业。
中国政府担心，影子银行市场正在制造资产价格泡沫，而央行在最近几周用通过拒绝向货币市场注入大量资金的方式，试图阻止泡沫的形成。
影子银行体系之所以崛起，是因为主流银行把关注焦点放在解决大型国有企业的需求上。
评级机构标准普尔预估，截至2012年底，影子银行的信贷投放规模为3.7万亿美元，约合国内生产总值（GDP）的44%。
惠誉则估测影子银行的规模现已达到GDP的约60%，认为包括常规借贷、影子银行和隐藏的地下借贷在内，所有形式的信贷“高速增长”，总规模可能已经达到GDP的200%。
法国兴业银行驻香港的中国经济学家姚炜表示：“这对于经济来说是一个巨大的问题。”
“这些套利活动的存在表明在实体经济中的赚钱机会很少。由于实际增长的机会有限，一旦金融市场开了一扇窗，当然所有人都挤到那里去了！”
新技术
企业可以通过委托贷款的形式对外放贷。为了规避企业不得直接贷款给其他企业的限制，它必须指定一家商业银行将钱贷给特定的借款人。
贷款金额、期限和利率均由贷款人规定，而银行从借贷双方那里赚取中介费，且此类贷款不会被计入银行的资产负债表。
在2013年前4个月中，每月新增委托贷款额平均为1790亿元人民币，较去年每月1060亿元人民币的平均水平上升不少。
上述钢铁公司的经理透露，该公司以6%左右的官方利率向银行借入资金，然后作为委托贷款转借给借款人，收取的利率水平最高达到官方利率的两倍。
位于中国北方河北省的一家本地政府控股的玻璃公司的总经理表示，随着业务趋缓，其公司增加了委托贷款的发放，今年迄今已经以6%至7%的利率，借出约3000万至4000万元人民币的贷款，贷款对象主要为其关联公司。
一些私人企业也在把资金投入这个领域。浙江龙盛集团股份有限公司是一家总部位于上海附近的专用化学品生产商。该公司在其2012年年报中披露其发放了50笔委托贷款，总额达到30亿元人民币。
龙盛集团以6%至7%的利率向子公司借出资金，而对于非关联公司的贷款则收取高达25%的利率。该公司表示，由于借款人还款困难，其中一笔利率为20%的贷款将会展期。
企业还纷纷买入银行承兑汇票，这是由其他银行发行的、可以通过出售兑现的可转让票据。这些企业在出售票据后，将部分所得用于放贷，并将其余所得用于购买更多票据，从而确保资金和收益的持续滚动。
本年迄今银行承兑汇票的月平均发行规模已较去年平均水平增长一倍以上，达到2228亿元人民币，而去年全年的月平均发行规模为875亿元人民币。
房地产行业堪忧
主要的担忧之一在于新制造的资金被用于房地产炒作，导致中国3年来对抗房地产泡沫的努力不仅成效不大，反而变得更为错综复杂。今年5月的新房价格较去年同期有所上升，且涨速达到2年多以来的最快水平。
央行大连办事处统计部门的一名不愿具名的官员表示，在大连2012年发放的所有委托贷款中，约30%进入房地产行业，且收取的平均利率为12%。
央行重庆办事处的另一名官员称，国有企业附属的金融公司和信用担保公司是此类贷款的主要发行人。
“在重庆，估计有50%或以上的此类贷款流入房地产行业以及地方政府融资平台。”该官员说道，“委托贷款的注入在一定程度上有助于降低房地产行业和本地融资企业的坏账比率，但风险不断发酵，如果经济进一步放缓，风险可能会极大。”
“钱荒”或令“政策模糊期”走到尽头
作者：John Foley
“不出声”是中国一项行之有效的政策。有关部门在将资金导向银行和企业时，一直将心照不宣作为一个有效工具，尤其是在涉及到财务义务的情况下。但银行用于寻求短期融资的银行间市场最近发生的骚动表明，政策模糊期可能很快必须终结。
一些银行在6月21日为隔夜融资所支付的高达25%的利率，是明显的问题信号。然而，中央央行的态度依然看不清楚。中国央行即便以直接向亟需资金的银行少量“放水”的方式施以援手，也无需在一个月内公布。市场对此只能抱最好的期待，做最坏的打算。
这并不是中国从含糊不清的政策中受惠的唯一领域。尽管缺乏明确的规章，但大部分投资者都坚信银行不可能倒闭，且银行存款都有国家作为后盾。储户因而对于将钱存在银行十分放心，而这些钱被银行用于发放贷款，帮助刺激了中国经济的迅速增长。中资银行认定，虽然有关部门从未明示，但一旦贷款成为坏账，当局将不会坐视不理，所以目前已通过融资平台向地方政府借出超过1.5万亿美元的资金。它们还使用短期理财产品提供信贷，购买这些产品的客户预期他们能收回全部本金。
然而，在金融危机时，含糊的态度可能很危险。银行依赖于储户的信任，但社交媒体毫不费力即能瓦解这种信任。中国银行在6月20日被迫使用微博否认有关资金违约的报道。对于小型银行来说，此类事件可能造成灾难性的后果。紧张不安的监管部门可以选择实施新闻管制，但禁止对某家银行的报道可能只会令情况更糟。
随着中国金融市场的日益复杂化，有关部门改变其不透明的作风正愈发变得更重要。对此，政府可以针对市场失灵出台明确的规章，包括对破产银行的解决方案。或者，政府就承认由于所有银行和储户都十分重要，其不会允许破产倒闭情况的发生，并且应对由此导致的道德风险。虽然以上两个出路都没有多大吸引力，但不确定性和不受控制的谣言要糟糕得多。
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