Taiyuan Rural Commercial Bank Launched as China Accelerates Restructuring of Regional Lenders

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China is set to see the launch of a new rural lender in Shanxi province amidst broader efforts by local authorities to shore up the health of the regional banking sector.

On 8 December the representatives of the seven founders of Taiyuan Rural Commercial Bank (太原农商银行) signed a founders’ agreement, to establish the bank as part of the restructuring of the rural credit sector in Shanxi province.

In July 2015 the Shanxi province government issued its local finance restructuring plan (山西省地方金融改革框架方案), which set the goal of converting its risk-fraught rural credit societies into rural commercial banks.

In June of this year the Shanxi province government stepped up the restructuring of its rural credit societies, outlining the goal of “creating a first-class rural commercial bank.” As of December 2020 the non-performing loan ratio (NPL) of rural credit societies in Shanxi province had fallen to under 10%, while risk provisions were above 150%.

The move comes amidst efforts in other parts of China to restructure local lenders due to concerns over their fraught health.

Sichuan province announced in November that it planned to merge two rural commercial banks – Leshan Rural Commercial Bank (乐山农商银行) and Anzhou Rural Commercial Bank (安州农商银行), to create Ganzi Rural Commercial Bank (甘孜农商银行).

The same month saw the launch of Bank of Sichuan – China’s largest municipal lender, via a merger between Liangshanzhou Commercial Bank (凉山州商业银行) and Panzhihua Municipal Commercial Bank (攀枝花市商业银行).

On 3 December Yulin municipality in Shaanxi province announced that it had approved the establishment of Yulin Rural Commercial Bank (榆林农商银行) back in July, and that its first shareholders meeting was held on 28 September. The bank is scheduled to commence official operation before the end of the year.

Yulin Rural Commercial Bank is the product of the merger of two local banks in Shaanxi province – Yuyang Rural Commercial Bank (榆阳农商银行) and Hengshan Rural Commercial Bank (横山农商银行).

China’s smaller regional banks have faced a tumultuous period over the past two years, with a string of potential bank runs and failures that kicked off with the forcible acquisition by the Chinese government of Inner Mongolia’s Baoshang Bank in May 2019.

This has since prompted a range of measures to shore up the health of smaller regional banks, which have most recently included the issuance of 10 billion yuan in special local bonds by the Guangdong province government to support the capital standing of rural lenders.

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