China suspends forex business for some foreign banks: sources

Wed Dec 30, 2015 9:13am EST
 
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SHANGHAI (Reuters) - China's central bank has suspended at least three foreign banks from conducting some foreign exchange business until the end of March, three sources who had seen the suspension notices told Reuters on Wednesday.

Included among the suspended services are liquidation of spot positions for clients and some other activities related to cross-border, onshore and offshore businesses, the sources said.

The sources, speaking on condition that the banks were not named, said the notices sent to the affected foreign banks by the People's Bank of China (PBOC) gave no reason for the suspension.

The PBOC did not immediately respond to a request for comment.

Separately, three financial market sources in Europe said Deutsche Bank was one of the banks to have part of its foreign exchange business in China suspended.

A spokeswoman for Deutsche in London declined to comment.

The measure follows a slew of steps taken by the Chinese government to steady the yuan since it devalued the currency in August.

The spread between the onshore and offshore markets for the yuan, or renminbi, has been growing since the devaluation, making it increasingly difficult for the central bank to manage its currency and stem an outflow of capital from an economy that is facing its slowest growth in 25 years.

The sources told Reuters that authorities had warned the banks that if they engaged in lucrative carry trade, taking advantage of the different exchange rates, the central bank would move to further block arbitrage channels.   Continued...

 
A Chinese national flag flutters outside the headquarters of the People's Bank of China, the Chinese central bank, in Beijing, April 3, 2014.  REUTERS/Petar Kujundzic