FSDC Says Current Focus is Capital Supplementation for Small and Medium-sized Banks

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One of China’s top financial regulators has stressed the need to support the capital supplementation efforts of smaller banks following a slew of upsets with regional lenders.

The State Council’s Financial Stability and Development Committee (FSDC) convened a meeting on 6 November on “deepening small and medium-sized bank reform and preventing and resolving financial risk.”

According to the meeting China currently must provide “focused support to multiple channels for capital supplementation by small and medium-sized banks and optimisation of capital structures.”

The meeting also called for “focusing on improvements to the commercial models of small and medium-sized banks.”

The meeting arrives just after the Chinese central bank and banking regulator were compelled to intervene in a potential bank run in Henan province involving the Yichuan Rural Commercial Bank.

Yichuan is one of several smaller regional lenders to succumb to serious malaise since the start of 2019.

In May the Chinese central bank took over Inner Mongolia’s Baoshang Bank due to bank run concerns, for the first such takeover in more than two decades.

Three major state-owned financial institutions subsequently took over the Bank of Jinzhou in north-eastern China in July, while the woes of Hengfeng Bank in Shandong province recently prompted rescue efforts from state-owned Central Huijin Investment Ltd.

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