China’s Banking Regulator Flags Stronger Scrutiny of Small-scale Lenders Following Henan Bank Run Fears


The China Banking and Insurance Regulatory Commission (CBIRC) has signalled further heavy scrutiny of the country’s smaller lenders, following rumour of bank-run conditions amongst rural financial institutions in Henan province.

“We are extremely focused on the health development of small and medium-sized banks, and in particular small-scale banks,” said Xiao Yuanqi (肖远企), CBIRC deputy-chair, at a state-run press conference held on 23 June.

“Overall, China’s small and medium-sized banks are operating steadily, and development is healthy, although there are still a number of problems.

“In particular, there is comparatively high risk amongst certain institutions, as well as allegations of criminal offences.

“Overall however, risk is completely controllable, and the lawful rights and interests of financial consumers in general are subject to lawful protection. Financial regulatory authorities will not spare any efforts in effectively performing related work.”

Xiao’s remarks arrive just following the launch of investigations by Henan province authorities into rural lenders who suspended withdrawals by customers, triggering bank run concerns.

On the afternoon of 18 June the Xuchang public security bureau announced that it had launched a criminal investigation into Henan New Wealth ((河南新财富集团) in April of this year, which had established that the company’s real controller – a Mr. Xu, was the head of a criminal group suspected of severe legal breaches in relation to rural county banks that first commenced in 2011.

According to Henan province authorities initial investigations had established that Henan New Wealth Group had engaged in criminal manipulation and usage of the online transaction systems of rural banks including Yuzhou Xin Minsheng (禹州新民生), and that local authorities were currently investigating the whereabouts of funds.

China’s banking authorities have announced that Henan New Wealth, a key shareholder in four rural county banks in the province, had colluded with internal and external parties to use third platforms to accept funds from the public in breach of criminal law.