YINGKOU, CHINA ¨C Bundles of yuan notes were stacked high behind the counters of branches of Yingkou Coastal Bank earlier this month, as the northeast China lender fought off a run on deposits while on-site government officials battled rumors of a funding crunch.
Yingkou was the latest small bank to have its deposit-reliant funding base undermined by depositors, spooked by the funding crunch that led to the shock state-led rescue of tiny regional lender Baoshang Bank. To help repair the damage, Yingkou hiked its already high deposit interest rates.
The run came just as smaller lenders¡¯ reliance on deposits for funding shot up this year after Baoshang¡¯s rescue sent interbank interest rates spiking, raising borrowing costs.
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