China considers new rules for smaller banks to limit risk - report

Bank of Jinzhou Co

29/08/2019 03:11

BEIJING/SHANGHAI, Aug 29 (Reuters) - China is considering
new rules for the country's small-to-medium financial
institutions to reduce risk in the wider economy, following a
number of state bailouts of smaller lenders, the state-run
Economic Information Daily reported on Thursday.
    The report, citing a source in the People's Bank of
China(PBOC), said the rules could require high-risk financial
institutions, local governments and the country's regulators to
jointly take on the responsibility of risk resolution for
smaller banks.
    The PBOC, the country's central bank, would also encourage
merger talks, instead of bankruptcies, when dealing with
problematic financial institutions, the report added. 
    "The central bank will diversify its policies and dismantle
the bomb based on the cause and nature of the risks," the report
quoted the source as saying.
    The government is considering the new framework as the
slowing Chinese economy has led to increases in sour loans,
smaller capital buffers and falling reserves. 
    A shock government-led takeover of little-known Baoshang
Bank in May was the first in a series of rescues, including of
the Bank of Jinzhou  0416.HK , which received backing from three
state-controlled financial institutions including the country's
largest lender Industrial and Commercial Bank of China (ICBC).
 urn:newsml:reuters.com:*:nL4N24T06B
    Earlier this week, financial newspaper 21st Century Business
Herald reported that China's state-owned Central Huijin
Investment is taking a stake in Hengfeng Bank. The PBOC said
that move would enhance the capital adequacy and corporate
governance of Hengfeng.  urn:newsml:reuters.com:*:nL4N2543OI
    No timeframe was given in Thursday's report for the
introduction of any potential new rules.

 (Reporting by Cheng Leng in Beijing and Engen Tham in Shanghai;
editing by Jane Wardell)
 ((engen.tham@thomsonreuters.com;))