BEIJING – China will take steps including management reshuffles and fund infusions to bolster the weakening profiles of its smaller banks, vice chairman of the banking and insurance regulator said, according to financial news outlet Caixin on Sunday.
As financial stability remains the top priority, the regulator will use reform and restructuring as the key approach to resolving banking risks, instead of doing “surgeries,” said Zhou Liang, vice chairman of China’s Banking and Insurance Regulatory Commission (CBIRC), at a forum in Beijing on Sunday, Caixin reported.
The health of China’s smaller banks has come under renewed scrutiny recently, as two local lenders suffered bank runs in less than two weeks amid fears over poor management and liquidity issues.
“Smaller banks are small financial institutions by size, but they carry a great spill-over risk,” said Zhou.
The smaller sector is facing risks because of a difficult macro environment both at home and abroad, poor management at smaller banks, and credit risks triggered by deteriorating financial conditions of companies, Zhou said.
Zhou said some of the reform steps would include improving corporate governance, writing off non-performing assets and replenishing capital.
“For institutions that have relatively severe problems, they need to introduce new strategic investors to carry out structural reforms,” Zhou said.
Earlier this year, a rare government seizure of then little-known Baoshang Bank and a state-rescue of Jinzhou Bank and Hengfeng Bank revived concerns about the underlying health of hundreds of small lenders in the country as China’s economic growth slowed to near three decade lows.