China’s Smaller Banks Come under Intense Scrutiny over Asset Quality

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Institutional investors are applying heightened scrutiny to small and medium-sized banks, due to concerns over their asset quality in the wake of a bank-run scandal in Henan province.

Since the start of September institutional investors have conducted research reviews of 14 banks on 23 occasions, including Bank of Suzhou, Qilu Bank, Zijin Bank, Zhangjiagang Bank, Bank of Wuxi, Bank of Ningbo and Jiangsu Jiangyin Rural Bank.

Focal points for the inspections and reviews include asset quality, interest spread trends and interbank operations. Rural lenders have also come under especial scrutiny, due the recent travails of the Henan province banking sector, where the failure of five village county banks has prompted intervention by local authorities.

On 8 September Bank of Ningbo welcomed inspections by 238 institutions, including 42 securities companies, 85 fund companies and 19 insurance sector firms. These included foreign-invested financial institutions Goldman Sachs, Credit Suisse and Bank of East Asia.