China's financial regulators said on Friday the country's banking and insurance regulator and the central bank, will take control of the small, troubled inner Mongolia-based Baoshang Bank due to the serious credit risks it poses.
The regulator's control of Baoshang will last for a year starting on Friday, the People's Bank of China and China Banking and Insurance Regulatory Commission said on their websites.
China Construction Bank will be entrusted to handle the business operations of the small lender, based in the industrial city of Baotou, the statement said.
"The move is to reduce the risk of a shock to the local economy," said said, adding that the Baoshang takeover appeared to be the first time that national authorities seized control of a bank since Chinese lenders started listing on stock markets in the 1990s.
Naturally, to avoid a panic bank run among other smaller, less capitalized banks, the CBIRC said that principal 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.
The takeover of the bank is the first in decades, and takes place amid China's crackdown on systemic financial risks, which in February 2018 resulted in the take over of former roll-up giant and conglomerate Anbang Insurance, which in 2015-2016 made eyebrow-raising investments in overseas property, including the Waldorf Astoria hotel in New York.
The question now is whether bank investors, having seen first hand for the first time in nearly 30 years, that a Chinese bank can fail, will jog at a leisurely pace, or not so leisurely, to their own local bank and pull out their deposits in a cool, calm and collected manner... or not so cool, calm and collected.
https://www.zerohedge.com/news/2019-05-24/it-begins-first-time-ever-china-takes-over-insolvent-bank
The regulator's control of Baoshang will last for a year starting on Friday, the People's Bank of China and China Banking and Insurance Regulatory Commission said on their websites.
China Construction Bank will be entrusted to handle the business operations of the small lender, based in the industrial city of Baotou, the statement said.
"The move is to reduce the risk of a shock to the local economy," said said, adding that the Baoshang takeover appeared to be the first time that national authorities seized control of a bank since Chinese lenders started listing on stock markets in the 1990s.
Naturally, to avoid a panic bank run among other smaller, less capitalized banks, the CBIRC said that principal 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.
The takeover of the bank is the first in decades, and takes place amid China's crackdown on systemic financial risks, which in February 2018 resulted in the take over of former roll-up giant and conglomerate Anbang Insurance, which in 2015-2016 made eyebrow-raising investments in overseas property, including the Waldorf Astoria hotel in New York.
The question now is whether bank investors, having seen first hand for the first time in nearly 30 years, that a Chinese bank can fail, will jog at a leisurely pace, or not so leisurely, to their own local bank and pull out their deposits in a cool, calm and collected manner... or not so cool, calm and collected.
https://www.zerohedge.com/news/2019-05-24/it-begins-first-time-ever-china-takes-over-insolvent-bank
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