In the latest sign of cracks appearing in the mainland's financial system, a rural commercial lender in Jiangsu province is grappling with a run on a branch by worried depositors. Jiangsu Sheyang Rural Commercial Bank, based in the city of Yancheng, is desperately trying to allay depositors' concerns after they rushed to withdraw money at one of its branches following rumours that it was insolvent. "Rumours about our solvency triggered the chaos," an official with the lender, who declined to be identified, told the South China Morning Post by phone yesterday. "The situation was serious and we will probably ask the police to find out the origin of the rumours." About 1,000 nervous depositors have gathered at the Qingfeng branch since Monday, prompting the bank's chairman to visit the branch to ease their concerns. However, unease among depositors was continuing, the official admitted. He said the bank was trying its utmost to stop the situation from developing into chaos. "We are a legal bank licensed by the China Banking Regulatory Commission [CBRC]," he said. "We have sufficient capital to pay back the depositors." The CBRC and its branch in Yancheng could not be reached for comment. Concerns about the asset quality of mainland banks have been mounting following reckless loan approvals since 2008, when the government embarked on a massive stimulus programme. A collapse of the mainland's illegal underground banking system is believed to have exacerbated the bad-loan problem. More loan guarantors have either gone bust or seen their bosses flee recently, according to the China News Service. The bank admitted that the failed businesses of loan guarantors could be a root cause of the "rumours". Loan guarantors are common in rural and underdeveloped parts of the mainland, serving borrowers who lack the collateral to obtain bank loans and charging fees for their services. The collapse of the loan guarantors has heightened suspicions of soaring non-performing loans at the Sheyang bank, but the official insisted its business operations were normal. According to its website, the Sheyang bank had deposits worth 12 billion yuan (HK$15.1 billion) last month. "It's not a single case and wouldn't be the only bank run in China," a source close to the CBRC said. "In some smaller counties, similar scenarios have happened." At the end of 2012, the default of a wealth management product issued by a Shanghai branch of Huaxia Bank raised doubts about the mainland's shadow banking system, with China Securities Regulatory Commission chairman Xiao Gang , who was then Bank of China boss, describing such products as China's Ponzi scheme. At the beginning of this year, a trust product launched by China Credit Trust failed to pay back investors. "Overall, banks in rural areas of the Yangtze River Delta look relatively healthy and strong," said He Fuqiang, a director of ZHY Money & Bond Market Investment Consulting Centre. "In other underdeveloped regions, things could be even worse." Shanghai resident Huang Jianguo said: "If I am not going to trust the bank to put my money in, who else can I trust?"