China bank outages trigger consumer cash worries

Tue Jun 25, 2013 3:04am EDT
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By Samuel Shen and Kazunori Takada

SHANGHAI (Reuters) - System outages at several Chinese banks since the weekend have exacerbated concerns amongst the public about a credit crunch, after the central bank tightened the availability of funds in the banking system as it tries to rein in informal lending.

A money transfer system at Bank of China (BOC) (3988.HK: Quote) (601988.SS: Quote), the country's third largest lender, temporarily failed on Monday, and some customers at Bank of Nanjing (601009.SS: Quote) also could not transfer money this week.

On Sunday, a nationwide outage of automatic tell machines (ATMs) and Point of Sales (POS) machines at China's biggest bank, Industrial and Commercial Bank of China (ICBC) (1398.HK: Quote)(601398.SS: Quote), were tweeted across China's popular Twitter-like Weibo.

BOC, Bank of Nanjing and ICBC have all said the outages were due to technical problems, but this did not allay customer concerns of a larger problem in the banking sector.

"I cannot withdraw money from ICBC and BOC, and don't know who will be next," wrote blogger Wang Yangyu.

"Can you banks give me a better explanation?"

Seeking to cut off funding to the unregulated "shadow banking" market, the central bank has not added significantly to the supply of cash recently, forcing short-term interest rates -- the price of borrowing money -- to rise sharply last week.

Interbank rates have moderated this week, but banking shares have fallen sharply over the past two days.   Continued...

A woman walks past a sign of Bank of China at its branch in Beijing March 26, 2013. REUTERS/Kim Kyung-Hoon