Meanwhile In China, Echoes Of Lehman As Interbank Market Freezes
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Department of Banking, Central Bank, Republic of China

One month ago we wrote that in the aftermath of the shocking government May 24 seizure of Baoshang Bank - not shocking because the bank failed as most Chinese banks are insolvent if left to their own devices due to the real, and far higher levels of non-performing loans, but because the government allowed it to happen in the open, sparking fears of who comes next (and when) - the PBOC "finally panicked and injected a whopping net 250 billion yuan ($36 billion) into the financial system via open-market operations, as it fills what traders have dubbed a growing funding gap following the Baoshang failure."

In retrospect, the PBOC failed to restore confidence in the stability of the Chinese banking system, and since then things have taken a turn for the far worse...

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