The People’s Bank of China (PBOC) has highlighted risk in relation to smaller regional lenders as a key area of concern in its latest report on financial stability.
The “China Financial Stability Report (2019)” (中国金融稳定报告（2019）) released by PBOC on 25 November highlights the need for “safe disposal of regional, structural liquidity risk for small and medium-sized banks.”
The Report makes frequent use of the term “targeted bomb disposal,” while indicating that PBOC will continue to focus on the liquidity conditions of small and medium-sized banks, as well as strengthen policy support for small and medium-sized banks and drive further improvements to their corporate management and risk prevention.
As of the end of the third quarter of 2019 the core tier 1 capital ratio of small and medium-sized banks was 10.25%, while the allowance for impairment of losses on loans was 1.74 trillion yuan, for an increase of 24.4% compared to the end of the preceding quarter.
The liquidity ratios of 99.2% of small and medium-sized Chinese banks was higher than regulatory requirements as of the end of the third quarter.
2019 has been a tumultuous year for smaller regional lenders in China, with a string of bank runs and upsets which in some cases necessitated intervention from the central government.
Two regional banks in China met with abortive bank runs within a two week period in early November – Yingkou Bank in the northeastern province of Liaoning and Yichuan Rural Commercial Bank in Henan province.
Earlier in the year the Chinese government took over Inner Mongolia’s beleaguered Baoshang Bank in May, for the first such forcible acquisition in more than two decades.
A trio of leading state-owned financial institutions subsequently took over the north-eastern Bank of Jinzhou in July, while state-owned Central Huijing Investment subsequently intervened in the fortunes of Shangdong province’s Hengfeng Bank.
Over 13% of Chinese Banks Categorised as High Risk, More than One Third of Rural Lenders: PBOC
China to Step up Liquidity Management for Smaller Lenders Following Two Bank Runs in Two Weeks
Chinese Central Bank Intervenes to Stem Bank Run in Henan Province
Chinese Authorities Come to the Aid of Third Beleaguered Regional Bank