Henan Province Authorities Outline Compensation Plan for Rural Bank Run Scandal

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Authorities in the central Chinese province of Henan have released a plan to deal with the fallout of a rural financial scandal that threatened to trigger a run on regional banks.

The Henan province banking and insurance regulator and the provincial financial authority jointly announced on the evening of 11 July that they would make advance payments to customers of four rural banks involved in the scandal, including:

  • Yuzhou Minsheng Village County Bank (禹州新民生村镇银行).
  • Shangcai Huimin Village County Bank (上蔡惠民村镇银行).
  • Zhecheng Huanghuai Village County Bank (柘城黄淮村镇银行).
  • Kaifeng Xindongfang Village County Bank (开封新东方村镇银行).

Starting from 15 July Henan province authorities will make the initial round of advance payments to individuals and institutional clients whose combined deposits are 50,000 yuan or less. Provincial authorities said that they will make a separate announcement for individuals and institutions whose combined deposits are in excess of 50,000 yuan.

Xiao Yuanqi (肖远企), deputy-chair of the China Banking and Insurance Regulatory Commission (CBIRC), previously addressed the topic of the rural bank run scandal in Henan Province at a press conference held on 23 June.

Xiao said that public security authorities were in the process of investigating the matter and had arrested a group of suspects, as well as seized assets in relation to the case.

“We are highly focused on the healthy development of small and medium-sized banks, and small banks in particular,” said Xiao.

“There are still some problems in relation to small and medium-sized banks – especially with individual institutions whose risk levels are high and who are suspected of criminal lawbreaking.

“Overall however, risk is completely under control, and the lawful rights and interests of financial consumers in general are subject to protection in accordance with the law.”

On 18 May CBIRC officials announced that Henan New Wealth Group (河南新财富集团) – a key shareholder in the four rural village county banks – had colluded with a third party platform to illegally accept funds from the public.

The Xuchang (许昌) municipal public security bureau has also released further details concerning their investigation into the matter, stating that Lu Yi (吕奕) was at the head of a criminal group that since 2011 had used Henan New Wealth Group and other companies to misappropriate funds from several rural lenders, including Yuzhou Xinminsheng (制禹州新民生). 

The misappropriation case involved the use of an independent platform established by a third party online finance platform in conjunction with Junzheng Zhida Tech Co., Ltd. (君正智达科技有限公司), which was under the control of Lu Yi. The platform was responsible for the creation of false loans, while another company – Chenyu Information Technology Co., Ltd. (宸钰信息技术有限公司) was established to delete and amend data.