Yichuan Rural Commercial Bank, a lender operating in central Henan Province, became the last Chinese bank to be bailed out by the government this year. The small financial institution, which has only about thirty branches in Yichuan County, has experienced a banking crisis provoked by rumors that its senior management was in trouble with the law and growing speculation placing it on the verge bankruptcy.
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Bank Run highlights the growing concern of depositors
Hundreds of depositors gathered this week in Yichuan Bank's offices to recover their savings before the collapse fears and found that they could not withdraw their money. At the same time, authorities confirmed Wednesday that they were investigating the former bank president and his main actor, Kang Fengli, for alleged corruption, Reuters reported. The police also arrested a woman, a local resident, for spreading false information about the bank's financial situation.
In an effort to avoid the run of the bank, the lender has issued a notice assuring the depositors of its financial health. The bank also asked them to ignore the rumors and tried to dissuade them from withdrawing their funds. Security in bank branches has been strengthened. Bank employees piled bundles of high-value yuan bills in front of customers 'eyes and reporters' cameras to calm the situation and prove that Yichuan had enough money to continue operating normally.
Despite the small size of Yichuan Rural Commercial Bank, the turmoil around the events has not gone unnoticed by financial authorities at the regional and national levels. The growing concern of depositors, exacerbated by the sharp economic slowdown in the country and the liquidity crisis in the Chinese banking sector, had to be fought by decisive state intervention aimed at preventing the spread of dangerous uncertainty. .
The online edition of the local paper of the Communist Party announced that Yichuan Bank had received 30 billion yuan (more than 4.26 billion US dollars) in the form of urgent financing of the & financement a a a a que que que que que que que. Union of Rural Credit Cooperatives of Henan Province. An additional five billion yuan was provided by the local branch of the People's Bank of China and 1.5 billion yuan by the Henan Rural Commercial Bank, Yichuan News said Wednesday. He also revealed that the Yichuan County Party Committee had organized a special meeting to resolve the situation.
The "small" crisis provokes a strong reaction from the state
According to a Wall Street Journal report, Yichuan Bank has only 62 billion yuan of assets (about $ 8.9 billion). At the same time, data from the China Chengxin International rating agency indicated that the lender accounted for 71% of the deposits and 82% of the loans in his county in September 2018. Clearly a small bank with local significance, but the The Chinese authorities are worried that this case will lead to a loss of confidence in bank deposits outside the region.
It remains to be seen whether the strong measures taken by the government will be enough to appease farmers and savers in Henan Province. What is worrying, however, is that this is not the first time a Chinese bank needs a bailout recently. At least three other regional lenders had to be rescued by Beijing earlier this year.
Baoshang Bank, based in the Inner Mongolia Autonomous Region, collapsed in May and was seized by the People's Bank of China. A few months later, the Jinzhou Bank, which operates in Liaoning Province, was rescued by three state-owned asset managers. Then in August, Heng Feng Bank failed and was nationalized.
A list published by Zerohedge contains nearly 20 small and medium-sized Chinese banks late in their annual reports. The latest data available from Barclays Research shows that they controlled nearly 4.5 billion yuan ($ 650 billion) of assets in 2017. Heng Feng, the largest financial institution on the list, held more than 1.4 billion trillion yuan in assets, the Bank of Jinzhou ranking second with Baoshang Bank is fourth with 576 billion assets.
The news of the bank run by the Yichuan Rural Commercial Bank comes after Chinese President Xi Jinping placed blockchain development at the center of the government's efforts at a Politburo meeting. And although the crypto markets have reacted positively to its bullish rhetoric, the People's Republic does not seem to be considering investing in the development of the crypto bank, for example, only a digital version of its fiat yuan.
Do you think the Chinese government can cope with the growing banking crisis? Share your thoughts on the subject in the comments section below.
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