PBOC draining banks' cash via repos: sources

Shanghai

CHINA'S central bank has drained money from cash-flush financial institutions by selling them bond repurchase agreements behind closed doors, sources with direct knowledge said, signalling policymakers' discomfort with excess liquidity in the financial system.

It is an unusual step, and was partly responsible for Chinese stocks tumbling over 6 per cent on Thursday in their worst daily decline in four months. The central bank sold seven-day, 14-day, and 28-day forward repos to financial institutions in recent days at current market interest rates, the sources told Reuters, but did not provide the amounts or name the specific banks.