It’s not a good sign when Chinese banks say they don’t know their exposure to the stock market crash.

And the fear that even more liquidity may be removed from the stock market was enough to give investors in Chinese equities the jitters.

The Shanghai Stock Exchange Composite Index fell 2.2% to 3,706 on Thursday. The Shenzhen Stock Exchange Composite Index sank 3.2% to 2,128 and the small-cap ChiNext Price Index tumbled 4.9% to 2,519. Meanwhile, Hong Kong’s Hang Seng Index declined just 0.5% to 24,498.

Citing unidentified bank officials, the China Securities Journal said Chinese banks had been checking their exposure to the stock market via wealth management products and loans collateralized with shares, reported Reuters. Banks have been a major source of lending to the grey market for stock investors, but the sharp market decline has put their money at risk, analysts told the news service.

The grey market is a loosely regulated network of state-owned commercial banks, trust companies, fund managers, and grassroots finance firms. People are worried that the grey market may have allowed more lending to fund stock purchases that was allowed.

More to the point, if banks decide to rein in their exposure to the stock market, it could squeeze a line of credit for potential buyers and undermine confidence in a price recovery, said Reuters.

China’s Politburo, a decision-making body of the Communist Party, promised to step up targeted adjustments of economic policy to foster stable growth, local media said on Thursday. Many have taken this to mean there will more interest rate cuts.

In a rare acknowledgement of the growth challenges faced by China, state radio quoted the Politburo as saying the country had yet to find new drivers to power its economy at a time when old engines were flagging, reported Reuters. To ensure the Chinese economy can sustain a “reasonable” pace of growth, the Politburo reiterated the government’s line that it would keep economic policies broadly stable, while increasing targeted adjustments.

Beijing will adopt a “whatever it takes” policy to underpin the stock markets, Marshall Mays, director of Emerging Alpha Advisors, a fund management company in Hong Kong, told Reuters “The CCP cannot allow prices to collapse,” he said, referring to the Communist Party.

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