Chinese Banks Back Away From Europe Lenders

Some of China's biggest banks have cut off a handful of their European counterparts from borrowing and derivatives trading as they seek to reduce their exposure to the simmering crisis on the Continent, people familiar with the matter said, The Wall Street Journal reported. Chinese state-owned banks including Industrial & Commercial Bank of China Ltd., Bank of China Ltd. and Bank of Communications Co. have scaled back their dealings with France's Société Générale SA, BNP Paribas SA and Crédit Agricole SA and at least in one case with Switzerland's UBS AG, people familiar with the matter said. The moves by the Chinese banks, which occurred late last year and early this year, aren't believed to have had a significant impact on the funding or trading positions of their European counterparts, analysts say, given the still-limited role played by the Chinese in global funding markets and derivatives trading. European officials have appealed to Beijing to help resolve the euro-zone debt crisis. Chinese leaders have expressed confidence in the future of Europe, China's biggest trading partner, but also have refrained from making any firm financial commitment. Some analysts cautioned against equating the state-controlled banks' cutbacks in Europe with a lack of sincerity by China in supporting the region. "The Chinese government has said it will support Europe, and that is up to the government," said Zhao Qingming, a senior analyst at China Construction Bank Corp. "Many commercial banks are listed companies and they have their shareholders to answer to." Many analysts view the Chinese banks' pullback from the European counterparties as a sign of improvement in how they manage risks posed by banks they do business with. At the height of global financial crisis in 2008, some Chinese banks, including Bank of China, got burned because they failed to unwind their exposure to now-defunct Lehman Brothers Holdings Inc. fast enough. Read more. (Subscription required.)