Chinese Banks Stop Lending Due To Liquidity Freeze

Tyler Durden's picture

If one thought the schizophrenic lies out of Europe between 2010 and 2013 were bad enough (the bulk of which it now appears were orchestrated by Mario Draghi), here comes China, a country which already has a "credibility" issue so to say, which has no choice but to lie as blatantly as possible in order to preserve some semblance of stability. The reason: as first forecast here months ago, and as has subsequently materialized, the credit/liquidity collapse in the country that lives and breathes on credit creation (the bulk of which is created in the shadow banking system) is rippling through the banking sector and causing unprecedented fallout for a financial industry that is already starved for every marginal yuan (and in a Keynesian "credit=growth" world, the economic crush is just waiting beyond the next corner).

Not unexpectedly following news that various retail and online banking services had been impaired in the early part of the week at China's biggest banks, now Caixin reports that banks are simply shutting lending to both businesses and individuals.

From Caixin:

A number of banks have temporarily halted lending to businesses and individuals apparently due to mounting pressure from liquidity shortages.

 

They include some branches of Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC), sources from the two banks said.

 

The bank was already having a hard time keeping up with deposit-to-loan ratio requirements even before the liquidity shortages hit, not to mention executives' recent determination to sort out the bank's liquidity management and control loans.

 

BOC plans to resume lending on July 15, he said.

 

As for ICBC branches, the amount of loans they can make is routinely capped under a monthly limit set by headquarters, a source from the bank's Shenzhen branch said. It was not unusual for branch banks to reach lending quotas before the end of month, he said. What was rare, however, was that headquarters had cut down on the quotas to make room for its own operations.

 

"All of our loans have been put on hold," the source said, "There may be some credit line when it comes to July, but it will definitely be used up in a few days."

 

* * *

 

The tightened liquidity, which started about June 6, has affected the interbank market, stock market, government bond underwriting and securities refinancing operations.

 

On June 23, ICBC customers had trouble using its online, counter and ATM services. This included making withdrawals and paying bills. The same thing happened to BOC users a day later.

 

The two banks responded by saying the disruptions were caused by system upgrades. However, users of China's Twitter-like weibo services were not convinced the problems were unrelated to the banks' liquidity situations.

 

A source from Agricultural Bank of China said there was no need to worry about large banks.

Luckily in China sources never lie. And neither does the PBOC, which recently said liquidity is ample, and that banks "are fine." In the meantime, anyone needing a loan to engage in business, and grow the Chinese economy at its just as laughable 7%... come back tomorrow.

And anyway, it's not the loan halt that is an issue for banks. It is when they have to do the same to deposits. The good news at least for now, is that the Chinese population hasn't figured out that as the PBOC undergoes an ad hoc $1 trillion deleveraging, a like amount of deposits will be impaired. But just like Russians in Cyprus, they will. Eventually.

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RunningMan's picture

When the bank runs begin, that's when it gets real. I'll make the popcorn.

cossack55's picture

Irish butter for me, please.

cossack55's picture

Oh, and pink Himalayan salt if you have it.

GetZeeGold's picture

 

 

Just print moar.....what's the problem?

JPM Hater001's picture

"Supplies!"

 

Gosh, its a bad juke but somehow it just fits.

kliguy38's picture

Can you say DIVERSION.......and they're gonna need a BIG one......

camaro68ss's picture

I love the smell of liquidity crunch in the morning.

idea_hamster's picture

"A source from Agricultural Bank of China said there was no need to worry about large banks."

But that's true -- there is no need to worry.

Just like there's no need to worry whether the sun will come up, because it's a foregone conclusion.

There's no need to worry about the banks, because they're already dead -- they just haven't fallen down yet.

What there is a need for is a plan for what to do when the urban Chinese find themselves just as poor as the rural Chinese.

Manthong's picture

Got yuan? Got Ag?..  

economics.. physics..  same difference.

The Master's picture

As I much as I hate to say it, this is going to drive people back to buying Treasuries in the near term.  10 yr yield going back to sub 2% in the next month or two IMO

Al Huxley's picture

Somehow I just don't see the Chinese public's reaction to bank failures being a rush to Treasuries.

fonzannoon's picture

I'm halfway in between you guys, I have 2.40ish with a side of nuttin much goin on elsewhere as we all go crazy.

I may dip my toe in the water and buy some stocks today to see if I can mush this bitch.

RSloane's picture

"Don't go into the long grass, don't go into the long grass!!"

http://www.youtube.com/watch?v=_DV5EbkIgd0

fonzannoon's picture

lol I just grabbed a canadian telecom thats gettin hammered. Just my toe.

I just can't operate under the premise that the mad max will be here by lunch.

pods's picture

I doubt that will happen that soon fonz, but just to be sure I tried on my assless chaps.

pods

fonzannoon's picture

I've been sittin here so long I don't fit in mine anymore.

I feel like pizza the hut.

ParkAveFlasher's picture

I for one, have plenty of peroxide stashed, you know, just in case my "ride" likes blondes.

Al Huxley's picture

I agree.  No panic in the Asian markets due to this.  Actually, it's a little surprising that there wasn't a bigger reaction.

Spigot's picture

Ice Nine is doing its work. Ever notice that when things a really, really bad, there is absolutely no news about it? Not a good idea to interpret silence as peace and prosperity. Fact is that China is vacuum imploding right now. Its something that not even they are in control of since it started when Japan went mini-Bernak in March. "adjustment" of the Yen means China's most profitable top end exports just got decimated. Cash flow from that top end profitability is noiw decreasing and its hitting the bottom line. China can't do anything about it, really. I tried to tell you guys that Japan's decision would trigger the death of the global ex machina of liquidity...

derek_vineyard's picture

im reminiscing the recent past with the lehman thingee.....money narkets went to yielding 7%---treasury money markets were closed to new investors by mutual funds(only place percieved safe)....breaking the buck seemed a logical outcome........haircut for everyone looked like the outcome.   Futures were limited down (or up) most everyday.....the country was transfixed on their wealth loss.........commodites dropped 30%,  TIPS yielded 3.00% + all along the curve; all banks were insolvent, but the powerful only threw lehman and bear streans to the wolves; the rest were bailed out, interest rates were dropped to .25% and qe started in full force (even though many were upset at the deficit level of that era already).  The depression that didn't happen.  And that was only 5 years ago.

CheapBastard's picture

Does this mean no more zero-down Ghost Cities?

CPL's picture

Anyone that walks into the T-Bills will never walk out the same though.  Everyone understands what the cost will be if they push a nickle into them.  Unless they jack the interest rate up to 20%, there will be no buyers for that debt.  If it ever got to 20%...then we've got a different problem then don't we?

Only someone that really wants to lose their shirt will approach them.  I'm sticking to building hardware, tools, silver/gold, seed and tight land management.  This is the situation that makers, builders and dreamers are going to have to change/evolve or drop where they stand.  This is not optional anymore.  Five years ago there were options, now there is only one path left.

Besides, with China not loaning I can tell you who's buying US debt this month.  No one.

 

Good luck to all, grab the popcorn BTW it's about to get really interesting.  And make sure you've got a bit of physical cash on hand, it'll take a couple of months for people to understand it's not worth anything now.

I Am Not a Copper Top's picture

T-bonds yes.  T-bills, not a real risk.  U.S. is not going to simply default, you will have an interest rate spike first.

CPL's picture

The US defaulted last year.  The jam on that polished turd was called 'The Fiscal Cliff'.  What's it been so far?  five...six times?  They are beyond broke now...well and beyond that point.

Ever play golf with a guy that calls a Mulligan every third shot?  

Means that you don't play with them until they figure out how to drive and putt. Otherwise it's a long painful game that nobody can figure out the score at the end of it.  Baring that you aren't out teaching a friend how to play the game.

Spigot's picture

The current situation nothing like what Volker was addressing ain 1980-81. T's will never go to 20% due to the Fed tightening. Might go there if every mofo on the planet wanted to sell T's, and that may certainly be coming along shortly.

If the merry go round music stops (what is happening in China right now) around the globe then we are all staring into a virtually bottomless pit of owing. And the "assets" side of the ledger, even if sold at face would fill maybe 3 to 5% of that hole. In such a scenario the entire system implodes on itself, and there will be a scramble for tangibles, energy and farmland "in hand" without regard for price since "price" in currency which are worhtless is a meaningless measure.

dontgoforit's picture

Right.  Now, do you want the 'blue' or the 'red' pill?  (In the end - and the end could be upon us faster than a jack-rabbit in heat, the best pill might be mother's little helper, just to take the edge off the sword as well collectively fall on it - or swallow it.)

Spigot's picture

The best defense of the individual, against the insanity of the collective, is independent thought and action. Proceed accordingly.

CPL's picture

Independent in thought acting towards the greater good of the communities they live in.  Prepare for the worst and hope for the best.

CPL's picture

And here we are today.  There is no measure of value in an exchange.  In place of this trade mechanism the substitute is now outright theft.  

Brazil is a good example right now.  Government rolled in, kicked people out for a soccer match and seized their homes for good measure.  What's the body count up to now there?  2.5 million on the streets roaring through every government security practice and check point.  Even the police are on side for this one because they know the difference between right and wrong.  Plus if they didn't they would be torn to pieces.

 

Spigot's picture

Quite so, quite so. Populus will indeed exert its might. Too bad for the "authorities", hey?

CPL's picture

Weird thing is I don't believe anyone knows who the 'authority' is anymore.  Men with guns lose just as much as the guy that pours foundations for a living.  Both groups are stuck in a similar position.

Getting eaten ass up from a horrible and unsolvable math problem of compound interest, fools printing money and rising costs which slams head long into what everyone's social expectations are.

Svendblaaskaeg's picture

"There's no need to worry about the banks, because they're already dead -- they just haven't fallen down yet."

Long Ping time sux

 

IllusionOfChoice's picture

If you do the math, RTT has to be 2.5+ years at the present juncture, but it's probably fair to say the Fed's routers are bad by now.

dontgoforit's picture

divert to war.  revert to war.  invert a war.  prevent a war.  divest a portfolio and bet on war.  war.  mf'er's are gonna take us to war - again, most likely

BeaverFever's picture

Let's just send them Justin Bieber.

Sudden Debt's picture

looking at your down vote.... I noticed we've got a angry Bieber fan amongst our midst....

 

ps: I voted you up because all that little prick deserves is a good kick in the nuts

Ralph Spoilsport's picture

At the Hagley museum annual fireworks display last Friday, the fireworks company decided to use a Bieber song for the finale. They even lit off a caricature of the little twerp complete with throatmike made out of fireworks. The finale was loudly booed. Bieber's 15 minutes are over.

wee-weed up's picture

Sudden Debt  said:  "that little prick deserves a good kick in the nuts"

Seriously, I don't think they've descended yet.

CH1's picture

And what if the young guys refuse to play cannon fodder this time?

GMadScientist's picture

And if it's the only game in town for some?

Citxmech's picture

All successful diversions start with a good advertising campaign to ensure our boys keep lining up at the recruiting station for God and Country.  

CH1's picture

Perhaps, but stories like this one pass from person to person, even if never being seen on TV:

http://libertyblitzkrieg.com/2013/06/24/i-feel-no-more-pain-i-am-free-a-...

prains's picture

And what if the young guys refuse to play cannon fodder this time?

 

once they've been unemployed for long enough and can't afford Halo 64 they'll be ready

Crash Overide's picture

"And what if the young guys refuse to play cannon fodder this time?"

 

It's like Call of Duty but for real, no chance, they have already been programmed. :(

spine001's picture

did you ever doubt that bankerswere gangsters? read the article about recorded conversations among the top executives of the Irish Bank that was bailed out with taxpayers money. For sionists /antisionists is a must read since it even has a nazi reference. Incredible but true. Irish are super angry.