China 's smaller banks are vulnerable to liquidity problems , which could result in bank runs or bankruptcies , because of investments they have made using unstable wholesale funding streams , warn investors , “ The liquidity rate for joint stock commercial banks is certainly rising , especially when rates increase , ” says Natixis ' chief economist , Alicia Garcia - Hererro . Furthermore , technical defaults are not impossible if banks continually issues accessing liquidity when fears of counterparty risk loom , warns DBS economist Nathan Chow . Tougher rules governing smaller banks ' exposure to shadow banking can also increase the risk of financial problems .
China's smaller banks are vulnerable to liquidity risk, which could result in bank runs or bankruptcies, because of investments they have made using unstable wholesale funding streams, warn analysts, “The liquidity concern for joint stock commercial banks is certainly rising, especially when rates increase,” says Natixis' chief economist, Alicia Garcia-Hererro. Furthermore, technical defaults are not impossible if banks face issues accessing liquidity when fears of counterparty risk loom, warns DBS economist Nathan Chow. Tougher rules governing smaller banks' access to shadow banking funds also increase the risk of liquidity problems.