WeChat rumour sparks run on rural Chinese bank in fresh sign of financial fragility amid economic slowdown
- Yichuan Rural Commercial Bank in Henan province suffered ‘concentrated cash withdrawals’ on Tuesday
- Authorities have already been forced to take over or recapitalise Baoshang Bank, the Bank of Jinzhou and Hengfeng Bank in the last six months
Police in China arrested a woman after she spread a rumour via WeChat that “the local rural commercial bank is going bust”, leading to hundreds of customers rushing to withdraw cash from the lender in Henan province in the latest case to hit small regional banks during the economic slowdown.
The 29-year-old female, surnamed Wang, was detained by police in Yichuan county after “concentrated cash withdrawals” from Yichuan Rural Commercial Bank. She is expected to be punished with five days in a detention centre for “fabricating facts and disrupting social order”.
The bank did not specify the reason for the sudden demand for cash withdrawals, but confirmed on Wednesday that “services and operation are running normally”.
The local Communist Party discipline authority said in a statement on Wednesday that the bank’s chairman, Kang Fengli, 54, had been placed under investigation for possible serious violations of discipline and law.
Regulators said the bank was “in normal operation with sufficient capital”, while the notice jointly issued by local branch of the People’s Bank of China and the China Banking Regulatory Commission also issued on Wednesday confirmed that all deposits at the bank are covered by insurance.
The statement came a day after the Yichuan Communist Party committee and the Yichuan county government confirmed on Tuesday that the bank had witnessed an increase in the number of the over-the-counter transactions at all its branches, which resulted in “slow processing”.
Local authorities warned that spreading rumours about the financial system is “a behaviour distorting financial order, endangering economic and financial security and even threatening social stability”.
The incident came at a time of growing signs of stress within China’s small regional banks after the authorities were forced to take over or recapitalise at least three large regional lenders in the last six months, namely Baoshang Bank in Inner Mongolia, the Bank of Jinzhou in the rust belt province of Liaoning and Hengfeng Bank in Shandong province.