Forex Blog

July 18, 2013

Chinese Banks Lending Yuan Offshore at Discount Rates

As China’s cash squeeze claims victims across the nation — from a bailout-seeking shipyard to a solar-panel maker missing a bond payment — there are places where Chinese money remains cheap and plentiful. Like Nigeria.

China Development Bank Corp. and Export-Import Bank of China are lending billions of yuan to some of the world’s riskiest regimes at interest rates hundreds of basis points below the cheapest commercial loans available at home. That lending in turn generates overseas contracts to build airports, roads and shopping malls for state-owned Chinese companies that are mired in debt.

“As opportunities go down and risks go up at home, these policy banks have gained a lot of power and they want to sustain themselves,” Kevin Gallagher, author of the 2010 book “The Dragon in the Room” about Chinese investment in Latin America, said in a telephone interview. “The majority of the countries that are getting the finance are countries with bond spreads that are through the roof.”

CDB, with a loan book more than three times the size of the World Bank’s, and China Eximbank are wholly owned by the state with a mandate to support Chinese foreign policy. Officials from the lenders accompany the nation’s leaders across the globe dispensing funds to forge ties from Costa Rica to Russia, helping secure supplies of oil, gas and minerals and creating work for some of China’s biggest state-owned enterprises.

Bloomberg

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September 25, 2012

Five British Banks Sign the Funding for Lending Program

Five of the UK’s six biggest lenders have signed up to the Funding for Lending scheme, designed to stimulate the economy by making cheaper loans available to firms and individuals.

HSBC is the only one of the top six not taking part, as it says it does not need additional funding.

The Bank of England, which runs the scheme, said 13 banks and building societies had signed up so far.

They represent 73% of the market and £1.2 trillion worth of lending.

The institutions can borrow the equivalent of up to 5% of their loan books immediately, and more if they meet certain conditions over the next year.

Based on their current lending levels, the 13 institutions could initially draw on up to £60bn of Bank of England funding.

via BBC

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June 30, 2010

European Banks Borrow Less Than Expected

The European Central Bank said today that it is making up to 131.9 billion euros ($161.5 billion) in loans available to European banks for the next three months. This is considerably less than expected and suggests that banks are in better financial shape than thought originally.

Banks tomorrow need to repay 442 billion euros in 12-month funds, the biggest amount ever awarded by the ECB and a key plank in its efforts to fight the financial crisis last year. Demand for the three-month cash today was a litmus test for the health of Europe’s banking system, economists said.

Demand was “surprisingly low and certainly a lot less than markets expected,” said Nick Kounis, chief European economist at Fortis Bank NV in Amsterdam. “It suggests that while there are certainly stresses in the system in some regions, it’s not as bad across the board as many people thought.”

Source: Bloomberg

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