China’s banking crisis draws fresh scrutiny as economic slowdown highlights emerging risks
- China’s banking regulator is pressing ahead with ‘risk disposal’ at small- and medium-sized banks to protect public savings
- A rural banking scandal, which has drawn rare protests, has highlighted latent financial risk facing China’s slowing economy
China’s banking regulator vowed on Thursday to crack down on criminal activity among small lenders, in a fresh pledge to address a rural bank crisis that has drawn rare protests and triggered concerns about financial stability ahead of the 20th party congress.
China’s small- and medium-sized banks account for nearly a third of total banking assets in the world’s No. 2 economy, but have over time built up substantial risks, according to the China Banking and Insurance Regulatory Commission (CBIRC).
In an effort to deal with the problem, the commission is carrying out a regulatory clamp down on equity and connected transactions, with a focus on shareholders and executives who have swindled money from small banks, CBIRC spokesman Qi Xiang said.
Regulators are also encouraging small banks to take on capital, including from overseas, to improve their capital volume and quality.
Qi said the overall operation of China’s small- and medium-sized banks was stable, but the regulator would press ahead with “risk disposal” to protect public savings.