Moody's says profitability will be affected.
Bloomberg recently reported that China’s smaller banks, caught between a seasonal cash squeeze and an official deleveraging drive, are stomaching record high borrowing costs to raise funds.
Issuance of negotiable certificates of deposit jumped to 758 billion yuan ($111.5 billion) last week, the most since the securities were introduced in 2013 as a lifeline for smaller banks, says Bloomberg.
The yield on one-month AAA rated NCDs has surged nearly one percentage point this month to an all-time high of 5.05 percent, while that on AA+ contracts reached 5.30 percent, according to data compiled by Bloomberg.
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