The US could end up crippling the world’s largest banks as it takes on North Korea

By Yen Nee Lee

As the U.S. mulls its next move against North Korea , some have suggested that sanctioning the major Chinese banks could be the most effective way to pressure the rogue nation into halting its nuclear programme.

Targeting the big lenders from the world’s second-largest economy is not a new idea . And it would not necessarily just be a way to lash out at Beijing for not controlling Pyongyang sufficiently: Some Chinese banks, like the Bank of China, are said to have helped North Korea evade sanctions.

But the big Chinese banks have so far avoided any punishments by the U.S., which has instead blacklisted smaller players such as Bank of Dandong for financing North Korea. That could change after the hermit nation claimed over the weekend that it successfully tested a hydrogen bomb — a much more powerful weapon compared to those it previously tested.

In response, President Donald Trump tweeted that the U.S. is considering “stopping all trade with any country doing business with North Korea” and Treasury Secretary Steve Mnuchin is reportedly drafting a harsher sanctions package.

China is North Korea’s largest trading partner, accounting for 85 per cent of the latter’s trade and has a “fair amount of leverage” over the hermit nation, Bejoy Das Gupta, Asia Pacific chief economist at the Institute of International Finance told CNBC’s “Squawk Box.”