Baoshang Bank’s accident

The Bank of China Insurance Supervisor decided to take over the management of Baoshang Bank, and its influence spread to the interbank depository market. Although the short-term has entered the stable situation of the China Development Bank, but the funds in the Mainland are tight, investors should pay attention to the relevant financial risks. A shares rebounded.

The People’s Bank of China and the Bank of China Insurance announced on the 24th (Friday) that in view of the serious credit risk of Baoshang Bank, in order to protect the rights of depositors and other customers, Yinbao Supervisor decided to take over the contractor bank for one year. Construction Bank (00939) set up a trusteeship working group, and under the guidance of the takeover group, it will work according to the escrow agreement.

After the Baoshang Bank was taken over, the interbank deposit-taking market in the Mainland was being affected. Some traders said that the trading yields of multiple interbank deposits in the secondary market were higher than the valuation of dozens of ideas, even higher than 80. The idea is that these deposit certificates are mostly rated at AAA, but the interest rate is also pushed up, very rare.

Interbank deposit receipts are an important tool for commercial banks’ debt management, which is used to improve the short, medium and long-term interest rate curves of the Shibor quotes in the interbank lending market. The main issuance period for interbank deposit certificates is 3 months to 6 months. Investors are financial institutions, mainly commercial banks, insurance, funds, etc.

1.7 trillion yuan of interbank deposit receipts due next month

Faba said that there was not much difference in the yield of interbank deposits between large, medium and small banks. However, after the incident of the Baoshang Bank, the spreads of different grades of future interbank deposits will gradually expand, large, medium and regional. The financing costs between city commercial banks will be significantly different. The data shows that in June, there will be more than 1.7 trillion yuan of interbank deposit certificates due, and small and medium banks may be affected.

In addition to interbank deposits, due to impaired market confidence, the market has long-term renminbi supply and liquidity is relatively poor, and the foreign exchange renminbi swap curve continues to climb. Yesterday’s one-year swap rate hit 215 pips, the highest since July last year. It is worth noting that the weighted average interest rate of inter-bank 7-day pledged repo, which reflects the liquidity of the banking system, has risen 35 points this week, which was 2.9 per cent yesterday, which means that the mainland funds are still tight.

Although the market confidence was damaged, the interest rate market fluctuated, but the stock market was not dragged down. The A-shares were stable yesterday, and the Shanghai Stock Exchange closed at 2,909 points, up 0.6%.

Pay attention to interest rate fluctuations

The Financial Times, the head of the PBOC, reported that the market is concerned about the performance of the Pledge Bank’s pledged repo business in the interbank market. After multiple channels, the two parties can perform normally without being affected.

Standard & Poor’s said that China took over the Baoshang Bank, which is in serious credit risk, and conveyed its clear signal of continued support for the banking industry. It is expected that the regulatory authorities will have a high degree of flexibility in the management of the troubled banks and believe that financial stability remains the primary consideration.

Ping An Securities said that it is expected that after the PBOC takes over the Baoshang Bank, it can accurately provide liquidity assistance, help it maintain normal operations, avoid credit risk transmission, and follow-up supervision will speed up the reorganization or restructuring of some commercial banks with risk concentration and poor management. There are uncertainties in external events to curb market sentiment, but the fundamentals of the banking sector are relatively stable and interest rates are high. It is recommended to focus on high-interest dividends.

Investors should pay attention to whether the Bank’s interest rate will continue to fluctuate after the takeover of the Bank of China. The current A-share market is not too big. However, according to past experience, if the funds are tight, the interest rate will suddenly rise. Investors should continue to pay attention to financial market risks.