Second branch of Chinese bank swamped as depositors pull cash

Depositors rush to another outlet of the lender in Yancheng hit by rumours over its solvency

PUBLISHED : Thursday, 27 March, 2014, 12:58am
UPDATED : Thursday, 27 March, 2014, 12:58am

A bank run in Yancheng spread to a second branch of the Jiangsu Sheyang Rural Commercial Bank yesterday, forcing the mayor to assure depositors that the institution was fully backed by the government and their money was not at risk.

Dozens of depositors, most of whom are senior citizens, flocked to a branch in Sheyang county, after they heard that the rural lender was not able to repay their money.

It was the third consecutive day the state-owned lender faced a run on its branches, although officials insisted they had enough funds to meet withdrawals.

"It is a sheer rumour," a bank official shouted at the depositors at the gate. "You don't have to withdraw money now … your deposits are safe."

It was a sheer rumour. You don’t have to withdraw money now

The local government deployed dozens of people including security guards, township cadres and police to maintain order while Yancheng mayor Wei Guoqiang arrived at the outlet in the afternoon in an apparent attempt to calm worried depositors.

"I assure you the bank will be operating as normal today, tomorrow, or in three years," Wei told the depositors.

"Do you know whom the bank is backed by? It's the government."

The bank run adds to mounting worries about the mainland's financial system, as concerns over bank asset quality and possible defaults of trust and wealth management products rippled through the system.

Sheyang banking staff waved a business certificate issued by the China Banking Regulatory Commission's Jiangsu branch behind the windows to prove the bank's legal status.

Several depositors told the South China Morning Post that the collapse of "a huge number" of loan guarantors in Sheyang recently weighed on them, fuelling suspicions about the financial institutions' solvency.

"This bank might not have a big problem and be able to repay the money, but the economy is definitely in bad shape and people have reasons to panic," said Liu Zhu, a depositor.

"For ordinary farmers, a deposit of 50,000 yuan (HK$62,500) is a large amount and they can't afford to lose the money."

The credit crisis taking place in Wenzhou's underground banking system in 2011 not only crippled the capital of the mainland's privately owned businesses, but hurt the morale of thousands of small-business owners who were reluctant to increase investments.

Some residents in Sheyang were unfazed.

"Why should we be worried. It's a state-owned bank and the government can print more money to pay us back," said one depositor.

"I won't be worried unless all the banks across the country go bankrupt. By that time, the yuan will be useless."