Chinese financial regulators on Friday took over a bank based in the northern Inner Mongolian region because of its “serious credit risk”.
The rare takeover of a domestic lender -- announced by the People’s Bank of China and the China Banking and Insurance Regulatory Commission in a joint statement -- is a worrying sign for China’s economy which last year slowed to its slowest annual pace in nearly three decades.
Baoshang bank had been backed by Tomorrow Group, a financial holding company run by billionaire Xiao Jianhua, according to financial news magazine Caixin, which reported last year that Tomorrow was trying to sell part of its holdings.
Xiao was whisked out of Hong Kong into mainland China in 2017, amid a crackdown on financial risk, and has not been heard of since.
The regulator’s control of the bank began Friday and will last one year, placing its operations in the custody of state-owned China Construction Bank, the statement said.
The regulators said they would guarantee the full amount of personal savings deposits with principal and interest.
China’s banks have long published low non-performing loan ratios, but many analysts believe some have papered over the extent of their problems.