PBOC Opaque Stress Test Catches Funds in Crossfire

China’s lack of transparency during a stress test on the nation’s banks became a cause of worldwide concern as it rocked bond and commodity markets and helped wipe out $4.5 trillion in global equity value.

While the Federal Reserve is signaling plans to pare stimulus that has kept U.S. overnight rates close to zero, the People’s Bank of China made no change to its goal of “prudent” monetary policy as borrowing costs whip-sawed. Chinese overnight rates jumped to a record 12.85 percent on June 20 amid speculation policy makers want to expose banks with mismatched financing and loan maturities. Asian emerging market stocks had their steepest weekly loss in 13 months, while their currencies dropped the most in almost two years.