HONG KONG/SHANGHAI Jan 20 China's central bank
will offer up to 120 billion yuan ($19.8 billion) in
extraordinary liquidity support to smaller banks via its
Short-term Lending Facility (SLF), three sources with direct
knowledge of the decision told Reuters on Monday.
The move by the People's Bank of China (PBOC) comes as the
interest rate that banks charge each other for short-term loans
has spiked in recent days, due largely to elevated cash demand
in the run-up to the Chinese Lunar New Year holiday, which
begins on Jan. 31.
Two money-market traders at Chinese commercial banks told
Reuters that banks incorporated at the regional or local level
can apply to the PBOC for fund injections when the interest rate
on the overnight bond repurchase rate exceeds 5
percent, the seven-day repo rate exceeds 7
percent, or the 14-day repo rate exceeds 8
The seven-day rate closed at 6.59 percent on a
weighted-average basis on Friday but individual trades occurred
as high as 10 percent.
A PBOC spokesman declined to comment.
($1 = 6.0502 Chinese yuan)
(Reporting by Hong Kong, Shanghai and Beijing newsrooms;
Writing by Gabriel Wildau; Editing by Kazunori Takada)