REGIONAL banks in China had to pay more for funds through China’s interbank bond market yesterday, and their share prices came under pressure, following a rare takeover of a troubled lender by the country’s banking and insurance regulator.

The China Banking and Insurance Regulatory Commission will take control of Inner Mongolia-based Baoshang Bank for a year from May 24, as it posed serious credit risks, the regulator and the central bank said Friday.

Baoshang Bank’s troubles pushed up yields on some negotiable certificates of deposit (NCD) issued by regional banks by more than 10 basis points yesterday, traders said.

An official at the China Foreign Exchange Trading System and National Interbank Funding Center, China’s interbank market trading platform, said it had suspended trading of Baoshang Bank’s bonds following the takeover.

Baoshang Bank has 206 outstanding bonds worth a total of 73.83 billion yuan (US$10.71 billion), according to Refinitiv data.

Qiu Xiandong, a trader at Bank of Jiaxing, said he saw no signs of panic in the interbank market.

“I don’t see major impact on the market so far,” he said, adding that the government’s takeover of Baoshang Bank was handled “quite well,” without causing information distortion that could threaten market stability.

The central bank said Sunday that it would offer “timely and sufficient funds to ensure that [Baoshang Bank’s] payment system is operating smoothly.”

The central bank said that it would guarantee all principal and interest of corporate deposits and interbank liabilities below 50 million yuan, and that the handling of those above 50 million yuan could be negotiated.

At least 70 percent of interbank debts exceeding 50 million yuan (US$7.25 million) owed by Baoshang Bank will be initially guaranteed by regulators, financial magazine Caixin reported yesterday, quoting sources.

(SD-Agencies)