June 14, 2019 / 1:31 PM / a month ago

China securities watchdog surveys brokerages, fund managers for signs of stress: sources

BEIJING/SHANGHAI (Reuters) - China’s securities watchdog has surveyed Chinese brokerages and fund managers for signs of financing stress, sources said on Friday, after a state takeover of a troubled bank in May spooked investors and triggered a spike in interbank funding costs.

The China Securities Regulatory Commission (CSRC) has held meetings with non-bank financial institutions recently to learn about the industry’s liquidity and funding conditions, as well as to assess credit default risks, said four sources with knowledge of the situation.

CSRC was not immediately reachable outside working hours for comment.

Chinese financial regulators took control of Inner Mongolia-based Baoshang Bank on May 24 due to “serious” credit risks, rattling domestic markets and prompting the People’s Bank of China (PBOC) to inject cash into the banking system.

Financing has become especially difficult for small banks, as well as brokerages and fund houses, due to demand for higher credit ratings and higher-quality collateral in the interbank lending market.

CSRC has met some institutions that had been aggressive in issuing structured products, which are facing mounting default risks in the current funding environment, one of the sources said.

Another source said it was unclear whether regulators would roll out fresh supportive measures after their surveys.

“Most institutions at the meetings say they are struggling,” said the source. “But we don’t know the attitude of the regulators, or whether there will be fresh policies or not.”

To soothe market concerns, regulators have taken a series of measures to ease liquidity stress, and repeatedly said risks at small financial institutions are manageable.

In the latest such measure, the PBOC said on Friday it will boost the quotas for two lending facilities to pump liquidity into the banking system.

Reporting by Xiangming Hou, Zheng Li and Ryan Woo; Writing by Samuel Shen; Editing by Peter Graff

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