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Chinese Bank On Verge Of Collapse After Sudden Bank Run
Chinese Bank On Verge Of Collapse After Sudden Bank Run
First it was Baoshang Bank , then it was Bank of Jinzhou, then, two months ago, China’s Heng Feng Bank with 1.4 trillion yuan in assets, quietly failed and was just as quietly nationalized. Today, a fourth prominent Chinese bank was on the verge of collapse under the weight of its bad loans, only this time the failure was far less quiet, as depositors of the rural lender swarmed the bank’s retail outlets, demanding their money in an angry demonstration of what Beijing is terrified of the most: a bank run.
Local business leaders, political cadres and banking executives rallied Thursday at the main branch of Henan Yichuan Rural Commercial Bank, just outside the central Chinese city of Luoyang, where they stood one by one before a microphone to pledge their backing for the bank, as smiling employees brandished wads of cash before television cameras to demonstrate just how much cash, literally, the bank had.
It was China’s latest, and most desperate attempt yet to project stability and reassure the public that all is well after rumors spread that the bank’s chairman was in trouble and the bank was on the brink of insolvency. However, as the WSJ reports, it wasn’t enough for 31-year-old Li Xue, who showed up for the third day Thursday to withdraw thousands of yuan of her mother’s life savings after hearing from fellow villagers that Yichuan Bank – which is the largest lender in Yichuan county by the number of branches and capital, and it is also a member of PBOC’s deposit insurance system, according to the local government – was going under.
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Chinese Bank With $100 Billion In Assets Is Bailed Out
Chinese Bank With $100 Billion In Assets Is Bailed Out
Step aside Baoshang Bank, it’s time for Chinese bank bailout #2.
Last Thursday, when reporting on the imminent failure of yet another Chinese bank in the inglorious aftermath of Baoshang Bank’s late May state takeover, we dusted off a list of deeply troubled Chinese financial institutions that had delayed their 2018 annual reports…
… and noted that the #2 bank on this list, Bank of Jinzhou – with some $105 billion in total assets – recently met financial institutions in its home Liaoning province to discuss measures to deal with liquidity problems, and in a parallel bailout to that of Baoshang, the bank was in talks to “introduce strategic investors” after a report that China’s financial regulators are seeking to resolve its liquidity problems sent its dollar-denominated debt plunging.
Fast forward just three days later, when said failure-cum-bailout is now official: three months after Baoshang Bank was seized by the government in a historic first, Bank of Jinzhou was just bailed out, winning government-backed “reinforcement” on Sunday as three state-controlled financial institutions said they would take at least 17.3% in the troubled lender, whose shares have been suspended since April.
Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, China Cinda Asset Management and China Great Wall Asset Management, two of China’s four largest distressed debt managers, said on Sunday they would take stakes in Bank of Jinzhou, Reuters reports.
To avoid further repo market lockups and freezing in the interbank funding market where in a freak incident, the Chinese government bond repo rate last Friday shot up to a whopping 1,000%…
