Press "Enter" to skip to content

China’s central bank to offer liquidity for banks after Baoshan bank takeover

CHECK THE WIRE FOR REAL-TIME NEWS UPDATES

China’s central bank said on Sunday that it would offer liquidity to Inner Mongolia-based Baoshang Bank, which the country’s financial regulators took over due to serious credit risks.

The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) would provide more policy support to improve small- and mid-sized banks’ corporate governance, according to a statement released on Sunday.

China’s banking and insurance regulator said that it will take over Inner Mongolia-based Baoshang Bank for a year staring on Friday due to the serious credit risks it poses, according to a joint statement released by the People’s Bank of China (PBOC) and China Banking and Insurance Regulatory Commission (CBIRC) on Friday .

The takeover, the first case in nearly twenty years, highlights that China’s regional lenders are still in bitter struggles, suffering from deteriorating asset qualities, inadequate capital buffers, and poor risk controls and corporate governance.

The rare takeover highlight the concerns that these struggling small banks are likely to make the country’s financial system more vulnerable amid the economic slowdown.

After the takeover, PBOC and CBIRC will offer liquidity support and timely and sufficient funds to ensure that the bank’s payment system is operating smoothly, said the PBOC.

“From the situation of the past two days, Baoshang Bank has sufficient funding in its local branches. Depositors can take out money freely and smoothly,” it said.

Principals and interest on personal saving accounts in the bank will be fully guaranteed, and the business operations of Baoshang bank will not be affected by the takeover, CBIRC said in a separate statement on Friday.

The central bank also said it would guarantee the safety of all principal and interest of corporate deposits and interbank liabilities below 50 million yuan, and that the handling of those above 50 million yuan could be negotiated.

Baoshang didn’t publish any annual earnings reports in the past two years, citing its plan to seek strategic investors. By the end of 2016, the bank had a total of 156.5 billion yuan ($22.68 billion) of outstanding loans, a 65 per cent higher than the end of 2014, according to the bank’s last filing on its assets and liabilities on its website.

Baoshang Bank came to prominence after its key stakeholder Tomorrow Holdings was targeted in a government crackdown on systemic risks posed by financial conglomerates.

China Construction Bank (CCB) will be entrusted to handle the business operations of the small lender, based in the industrial city of Baotou, according to the statement.

Related Post

Chinese regulators ask banks to tighten property d... Chinese regulator has asked some banks to tighten quota for real estate development loans from Thursday August 29, the latest move to ramp up restrict...
China’s Big Four state banks all announced w... China's Big Four state-owned banks have all announced plans to set up wholly-owned wealth management subsidiaries, bringing the total number of banks ...
Chinese regulator to tighten oversight of banks... Chinese regulator issued draft rules on Tuesday which increases types of assets that banks are required to recognise as non-performing loans (NPLs) to...
Chinese local regulators eye tighter rules on bad ... China's banking and insurance regulators at the local level have asked some banks to meet higher requirement for counting bad loans, in a bid to bette...
Chinese banks to be allowed to issue perpetual bon... A Chinese government agency responsible for financial stability said it is seeking to help commercial banks replenish capital through more channels an...

Top