2013-07-02

The Hunt For Liquidity: Big Chinese Banks Borrowing From Small Banks; State Owned Mega Bank Sub-Branches Borrow From Rural Cooperatives

Below is the (poorly translated) Google Translation of the article. Many big takeaways, including:

Pressure is coming from the top down; large banks are in worse shape than smaller banks, something we also saw in the U.S. crisis of 2008.

Some sub-branches of the big four state owned banks are borrowing from rural cooperatives.

Deposits were fleeing large banks to the tune of 30%. Small banks serve small and medium businesses, but big banks serve the real estate developers and other firms facing pressure due to government policies.

This credit crunch began in 2011 with the real estate crackdown. This is an intensification and flare up of an ongoing credit event.

The battle for deposits has gone nuclear. Some banks have limits on deposit rates, for example 5.5% in one case cited in the article. Yet many banks are now enticing depositors with 7% interest or higher.

One bank mentioned in the article hit their 2013 lending target in March.

Banks are negotiating in secret in order to get around capital restrictions.


流动性饥渴:大行找小行“借贷”
"Shortage of money is sitting in the office to come out of the word, right? "July 2, Lin Jiandong more than once referred to this recent buzzword. Moreover, each mentioned once, we will send an exaggeration of ridicule voice, "I have been concerned about the situation of this wave of regulation, public information reflected in , and our grassroots banks operating in market conditions, is out of touch for . "Lin said.

Lin Jiandong IICA Zhejiang region of a line of the branch president, where he considers himself a grass-roots small banks did not feel that this volatility on the market. And this year the bank capital position, showing the heat transfer with the current market of "money shortage" totally rebellious 's logic.

"This wave of pressure should be from top to bottom of a small row easily than big firms. " is indeed as Lin Jiandong 's judgment, Jiangsu Province branch president of a state accusing him of a Lu Zhen (a pseudonym) said that from his own where the bank Look, like magic, like financial pressure, year after year urgent.

Particularly mysterious is that many banks newspaper survey from Jiangsu and Zhejiang learned from IICA line to the city commercial banks, state-owned big firms, financial pressure is inversely related with bank size, the scale, the more feeling financial pressure; interview to understand that, even with the state accusing him recently to find with the regional branch lines and other basic small rural cooperative financial institutions lending in interesting situations.

Behind The reason is that the big firms and other sources of funds are mostly real estate developers and other large customers, in this wave of austerity is suppressed, customer churn in bank funding constraints; while IICA line and other basic bank savings is the main source of small and micro enterprises, In the current round of austerity in the latter be encouraged.

Branch president of Lanchu pressure

"Is a Stolen Life." June 23, Lu Zhen get a 20 million yuan in the deposit, relieved. And two days ago, Shibor (Shanghai Interbank Offered Rate) rose almost across the board, as a result of a state-owned big firms transferred funds tense and breach of contract, "money shortage" touted up. "The end of June of deposits as well as the second half of the decision in July to lend the amount of deposit is the foundation of the bank of the country, the source of profits. "

"In fact, this wave of pressure from two years ago, began to accumulate." Lu Zhen where the institutions, banking institutions in the region, the total deposits ranked second.

Lu said that this year with previous years, the largest of the difference is that the society 's funds obviously nervous, sources less. While in previous years is competition severe, the community does not lack money.

Lu Zhen introduction, in which he 's banking system, bank deposits total deposits is the main source of funds, of course, non-bank financial services sector 's deposits, including various types of deposits. Non-bank financial services sector, including insurance, securities, trust, small loans and so on.

More so Lu Zhen restless night 's yes, many branch outlets savings amount, even negative growth, "also a lot of negative growth, over 30%."

In fact, this wave of bank liquidity crunch period began in 2011. Deposit ratio was because the pressure, you compete with banks offering short-term or even catch a camel ultra-short-term financial products, Lu Zhen institution 's front-line marketers began to speculate and anticipate this wave of banks tightening now states, "At the time, everyone joked , afraid of trouble you? have central Mom Danzhao it. "

Lu Zhen introduction, but front-line operational staff do not think so much, I felt the head office level, so many experts, there are good reasons to do so naturally, they certainly have the ease way.

"Solicit depositors, financial products such as business assessment index a quarter of a quarter increase, we are just going to finish indicators, however, marketing staff daily morning meeting, as more and more like MLM to boost Manner of brainwashing."

Lu Zhen 's annual assessment of the deposit amount is 200 million yuan, and this time last year at this time, are not yet complete index. End of each month and quarter-end statistical indicators, will feel the tension; course, the end of the year and the year is more like a "battle." The total deposits of negative growth pressure line will often investigate discussion.

"We analyzed all the customers of the loss, and found to reduce the majority of the senior client assets. "Lu Zhen I also have a large customer churn.

"I've been doing a big customer, one that is 100 million is up, the target to complete two on the line. "Lu Zhen said he 's target customers are developers, shareholders have the best government background of the kind. But last year and this continuous loss of several large customers, these are real estate developers.

On the other hand, real estate macro control policies continue to overweight, prospects subtle; mainly rely on these large customers of the state accusing him, Lu Zhen and other personal in which the pressure in a year stronger than one year.

Pressure is not just bank middle. Newspaper learned that not long ago a branch of Agricultural Bank of China Shanghai, newly recruited staff of employees to bear a small yellow deposits indicators pressure, he had to let her husband bought yields unpredictable line of financial products, to complete the index.

IICA line of "loose" Paradox

And Lu Zhen different, as the Zhejiang city IICA line of branch president, Lin Jiandong recent live very easily.

"In fact the current macroeconomic policy should be moderately tight to the central bank squeezed out the water, deleveraging, this policy should be continued. "is also a branch president, as opposed to Lu Zhen, Lin Jiandong in this so-called the

"Money shortage" in, looked calm, "Our system does not have any feeling of pressure."

Lin analysis of their own system of rural cooperative banks where the fund composition. Its deposits, savings accounting for about 98% of the total. Among them, the individual and private and other small farmers and micro-businesses or individuals to deposit characteristics of the decision, the source of these funds are relatively stable, and not national regulatory policies being squeezed, to leverage the investment. Moreover, all these years, the rural social security and other aspects of the improvement in this area of the deposit of funds accounted for more than 2%. "We have to deposit at ease, no water. "

"Like entering the development of the golden path. "Lin case said.

Coincidence of that, as Lin's major customers of small and micro enterprises, rural social security, etc., it is precisely the country in recent years,

Family policy to vigorously support the column. Lin Jiandong where the small micro-financial institutions, deposits form, the basic no other large real estate projects of funding sources, this fluctuation, but seem healthy.

"Actually, we all understand that the central bank 's regulatory purpose of the market is trying to turn over the money driven into the real economy. "Lin Jiandong said.

Forest practitioners in community financial institutions nearly 18 years, he bluntly that he basically does not express any opinion on the media, public opinion, because there is the head office discipline. But this time, he could not suppress a little.

Lin said that after a number of other areas have been lending to the real estate of the capital, it is impossible in such a short span of period gave withdraw, "a policy change, it is impossible banks face immediately after all banks are also enterprises, but also should have the spirit of the agreement. These areas of asset recovery will take time. "

"This is actually not money problems, is the bank of the policy of the miscarriage of justice. "area of a city firm Zhejiang branch president Kim Ho (a pseudonym) on the market 's perception of the same feelings with Lin Jiandong, "before lending fierce put, that the central bank would be relatively Relax. "

In response, Kim Ho and other high-level communication between the often also do this prediction, as long as the release that the deposit reserve 0.5% of the national market will be 600 billion funds released. Unexpectedly, the central bank has pinched tight and hold it.

"In fact, in February we have had a study." He recalled Kim, remember that the M1, M2 fell sharply, mainly due to the slowdown in deposits. Central bank released the data show, M1-M2 negative scissors -5.7% -5.1% qoq to expand, capital activity dropped significantly, deposits continued to increase regular basis, "This is an obvious the tightening signal. "

Tightening the money supply, directly reflected in the bank to solicit depositors business of intense competition. This white-hot, not only in the market, banks and other financial institutions in lending, deposit rates also turn into hurricane.

Dahon find a small line of "lending"?

And now, regardless of Dahon small line, the reporter interviewed clinics, Lanchu actually starts heating up.

"Our line of the provisions of deposit rate can not exceed 5.5%, which gives us a lot of pressure to carry out operations. "He said Kim, joint-stock banks on the market, most of them have reached more than 7%.

According to its introduction, this year, commercial banks are no longer limited to simple way Lanchu 's commitment to "high interest" and "innovation" model also includes tailored financial products, reimbursement of expenses, etc., and even the rapid development in recent years, is called " their own money management artifact " of funds automatic imputation business, but also has become the most relied on bank deposits Running the "Absorbing artifact."

Lu Zhen was washed six deposits assessment, a lot of pressure, "before large customers sometimes low-interest funds back to the bank, to help us through the critical point." But this year, they came back to solicit depositors high interest rates, 6,000,000 yuan deposit a multi-annual increase of 3.5 million.

In addition, banks have large sums of money by providing tailor-made financial products, as well as additional funds to the line directed to issue high-yield financial products the way funds poaching, "This model is easy to step on regulatory red line, since the second half of financial products frequently made case, that is because the bank 's funding pressures cause. "

"This year we dot the loan amount, in March this year basically put over. "He candidly reveal their payments early in the operating profit, driven by madness loan, you need to head office lending of the loan amount.

Some banks also do not secretly through the financial institutions "borrow deposits" in the "moderately tight" monetary policy trend, the bank 's capital back showing an "interesting" path, "These are not the head office level of borrowing law, accusing the find IICA Bank and other financial institutions to borrow than more basic level. "a joint-stock banks Treasury Department 's responsible person said.

"This transaction is not a fixed price, the two sides negotiated secretly." One line IICA headquarters executives, the current high price of funds of more than 1.2%.

He also revealed that the region a row with a state-owned joint-stock banks of a "polygonal" Auction.

In mid-May, the state bank official asked to borrow 60 million in deposits, period of six months, the interest rate of 0.8%. Although the offer is low, but because the two sides have had before trading IICA line agreed.

The inner circle of the other joint-stock banks of the branch responsible person knows both sides of the "sale", the proposal by the circle of four outlets responsible person participate in the auction. Eventually, the price of money pushed up to 1.2%. This "game" so that the person in charge IICA line turned the music, not only to earn a large sum, but also won a dinner for the small circle.

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