Anhui-based commercial lender Huishang Bank (徽商银行) has unveiled plans take over branches and related staff of beleaguered Inner Mongolian lender Baoshang Bank.
Huishang announced on 6 February that it plans to acquire Baoshang Bank’s Beijing branch, Shenzhen branch, Chengdu branch and Ningbo branch, whose assets and business are collectively valued at around 106.5 billion yuan.
Huishang will issue USD$2.9 billion in tier-2 capital bonds by 2021 in order to ensure that its capital adequacy levels remain above the regulatory threshold.
Huishang Bank also announced that it planned to make a contribution of up to 3.6 billion yuan to the launch of a province-level legal person financial institution in Inner Mongolia, in exchange for an equity stake of approximately 15%.
The new financial institution will have registered capital of approximately 20 billion yuan, with Inner Mongolia’s finance department and state-owned enterprises jointly holding approximately 50.16% of equity.
The Depository Insurance Fund Management Co., Ltd. (存款保险基金管理有限责任公司) will hold approximately 29.84%, while China Construction Bank (CCB) subsidiary Jianxin Finance Asset Investment Co., Ltd. (建信金融资产投资有限公司) will also be a key shareholder.
Huishang Bank was one of the biggest creditors of Baoshang Bank, which was forcibly acquired by the Chinese central government in 2019, during an extremely rough year for China’s regional banks.
On 24 May 2019 the Chinese central bank and the China Banking and Insurance Regulatory Commission (CBIRC) announced the launch of a takeover of Baoshang Bank for a period of one year in the wake of “severe credit risk,” with management of the bank entrusted to leading state-owned lender China Construction Bank.
The move marked the first time that Chinese regulators have launched an official takeover of a commercial bank, as well as the second time in little over a year that they had taken over a financial institution following their actions with regard to Anbang Group in February 2018.
Domestic analysts say that the decision helped to prevent a bank run in the region of Inner Mongolia, while others referred to the incident as a “mini-Lehmann moment” which would lead to the consolidation of other small-scale Chinese lenders.