Bank of China denies monetary default amid fund shortage rumor

Bank of China (BOC), the country's leading commercial bank, on Thursday evening denied a media report claiming the bank had defaulted earlier in the day. The BOC statement came after the official Sina Weibo account for 21st Century Business Herald said the bank had defaulted on Thursday afternoon, deferring transactions for half an hour due to a fund shortage, citing anonymous sources. BOC responded in a post on its official Sina Weibo that it has never had monetary defaults and had timely completed all outbound payments on Thursday. BOC also said that the rumors are "seriously unfounded" and the bank reserves the right to pursue legal action against those who started the rumors out of malicious intent. Recent interest rate increases in China's inter-bank market have raised market concerns over a liquidity crunch. The Shanghai Interbank Offered Rate (SHIBOR) overnight rate surged 578.40 base points to 13.44 percent on Thursday, and fixing Repo 7-day, another gauge of interbank interest, gained 292.9 base points to 11 percent. However, the central bank issued three-month bank bills worth 2 billion yuan (324 million U.S. dollars) on Tuesday and Thursday, respectively, missing market expectation over large-scale liquidity injection. The State Council, or China's Cabinet, said at a meeting on Wednesday that the government will maintain a prudent monetary policy with reasonable scale of monetary aggregates.