(Yicai Global) June 8 -- Commercial banks in Shanghai have been hiking investment in and underwriting of bonds to help local governments and small firms raise money, playing a vital role in the economic recovery after the recent Covid-19 flareup.

The banks have been using specialized capital institutions to buy special local government bonds issued amid the pandemic, Yicai Global learned from the Shanghai branch of the China Banking and Insurance Regulatory Commission. China Merchants Bank, for example, had invested CNY107.2 billion (USD16.1 billion) in special local government bonds as of the end of April, up CNY21.9 billion this year.

Bank of Jiangsu has made new investments of CNY17.1 billion in SLGBs, of which CNY5 billion went to Shanghai, Beijing, and Shenzhen, which were hit hard by the coronavirus.

Hengfeng Bank and Bank of Ningbo had underwritten CNY6.6 billion and CNY9.2 billion in SLGBs, respectively, as of the end of last month.

These specialized institutions have also invested in debt issued by micro and small businesses to help the real economy recover. Bank of Jiangsu had bought CNY4 billion of such bonds as of the end of last month, and Hengfeng Bank had invested CNY1 billion. 

The lenders have also brought their other financial services into full play. For instance, the yuan trading headquarters of Bank of China in Shanghai has kept running as usual amid the pandemic to meet the needs of overseas financial institutions for yuan-denominated bonds.

The bank had concluded CNY430 billion in spot deals and CNY55.9 billion in interest rate swap transactions with overseas institutions as of May 20.

The precious metals department of Industrial and Commercial Bank of China has raised support for miners, smelters and jewelers during the pandemic and helped them maintain normal production and operations by providing them with metal leasing services.

Specialized capital institutions were formed by banks to conduct bond trading and sales, inter-bank lending, and foreign exchange, derivatives and precious metal transactions. China had approved 25 commercial banks to set up such institutions as of last June, and most of them are in Shanghai.

Editors: Dou Shicong, Tom Litting