Chinese regulator to take over Baoshang Bank due to credit risks

[BEIJING] China's financial regulators said on Friday the country's banking and insurance regulator will take control of Inner Mongolia-based Baoshang Bank due to the serious credit risks it poses, in a rare takeover of a domestic lender.

The regulator's control of Baoshang will last for a year starting on Friday, the People's Bank of China (PBOC) and China Banking and Insurance Regulatory Commission (CBIRC) said on their websites.

China Construction Bank (CCB) will be entrusted to handle the business operations of the small lender, based in the industrial city of Baotou, the statement said.

Baoshang Bank came to prominence after its key stakeholder Tomorrow Holdings was targeted in a government crackdown on systemic risks posed by financial conglomerates.

The rare takeover, the first in nearly two decades, also highlights the long struggle of some smaller regional lenders in China, which suffer from deteriorating asset qualities, inadequate capital buffers, and poor internal controls and corporate governance.

There is concern this will add to the vulnerability of country's financial system amid the economic slowdown.

Baoshang had a total of 156.5 billion yuan (S$31.2 billion) of outstanding loans by the end of 2016, a 65 per cent jump from the end of 2014, according to the bank's last filing on its assets and liabilities on its website. Its non-performing loan ratio was at 1.68 per cent as of December 2016.

It has not published any annual reports since then, citing its plan to seek strategic investors.

Principals and interest on personal saving accounts in the bank will be fully guaranteed, and the business operations of Baoshang bank will not be affected by the takeover, CBIRC said in a separate statement on Friday.

In China's crackdown on systemic financial risks, the banking and insurance regulator took over Anbang Insurance Group in February 2018.

REUTERS