PBoC steps in to bail out regional lender

Credit: REUTERS/Thomas White

HONG KONG, May 27 (IFR) - China's central bank has said that it would offer liquidity and other support to Baoshang Bank after regulators were forced to step in last Friday in the first state takeover of a privately owned bank in nearly two decades.

The People's Bank of China said in a statement yesterday that it and the China Banking and Insurance Regulatory Commission would offer liquidity to the Inner Mongolia-based lender as well as support to improve corporate governance.

The central bank also said it would guarantee all principal and interest of corporate deposits and interbank liabilities below Rmb50m (US$7.25m), while those above Rmb50m would be subject to negotiations.

The PBoC said last Friday that CBIRC would take control of Baoshang for a year starting on May 24. China Construction Bank has been charged with managing the day-to-day operations of the bank.

The China Foreign Exchange Trading System and National Interbank Funding Center have suspended trading of Baoshang Bank's bonds in China's interbank market, Reuters reported on Monday. Baoshang Bank has 206 outstanding bonds worth a total of Rmb73.83bn, Reuters said, citing Refinitiv data.

Baoshang's takeover comes amid growing concerns about the health of a number of Chinese regional lenders, many of which have helped fuel the growth of shadow banking and are deemed to be susceptible to slowing economic growth, according to analysts.

Baoshang had Rmb156.5bn of outstanding loans at the end of 2016, a 65% jump from the end of 2014. The unlisted bank has not published an annual report since 2016, citing a plan to seek strategic investors.

Baoshang's biggest shareholder is Tomorrow Holdings, which is run by Chinese-Canadian billionaire Xiao Jianhua, who disappeared from a Hong Kong hotel just over two years ago and is rumoured to be facing corruption and bribery charges.

(Reporting by Thomas Blott; Editing by Vincent Baby)


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