China bank outages trigger consumer cash worries

By Samuel Shen and Kazunori Takada

SHANGHAI (Reuters) - System outages at several Chinese banks since the weekend have exacerbated concerns amongst the public about a credit crunch, after the central bank tightened the availability of funds in the banking system as it tries to rein in informal lending.

A money transfer system at Bank of China (BOC) , the country's third largest lender, temporarily failed on Monday, and some customers at Bank of Nanjing also could not transfer money this week.

On Sunday, a nationwide outage of automatic tell machines (ATMs) and Point of Sales (POS) machines at China's biggest bank, Industrial and Commercial Bank of China (ICBC) , were tweeted across China's popular Twitter-like Weibo.

BOC, Bank of Nanjing and ICBC have all said the outages were due to technical problems, but this did not allay customer concerns of a larger problem in the banking sector.

"I cannot withdraw money from ICBC and BOC, and don't know who will be next," wrote blogger Wang Yangyu.

"Can you banks give me a better explanation?"

Seeking to cut off funding to the unregulated "shadow banking" market, the central bank has not added significantly to the supply of cash recently, forcing short-term interest rates -- the price of borrowing money -- to rise sharply last week.

Interbank rates have moderated this week, but banking shares have fallen sharply over the past two days.

While some bloggers were questioning whether a banking crisis was imminent, there was no sign of unusual queues at banks or ATMs in Shanghai on Tuesday.

ICBC said in a statement on Tuesday that Sunday's system outage was caused by a system upgrade the night before and a surge in business transactions that morning. It said that all businesses have returned to normal.

In an email, BOC said there had been a slowdown in its money transfer system with futures brokerages that had been rectified.

However on Weibo, bloggers complained they were still unable to withdraw money at some ATMs or even transfer funds at a branch.

(Reporting by Shanghai newsroom and Zhang Shengnan in BEIJING; Editing by John Mair)

Source: http://news.yahoo.com/china-bank-outages-trigger-consumer-cash-worries-070401482.html

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