There is widespread concern about the futures of small and
medium local Chinese banks that lack strong and formal
Troubled Inner Mongolia-based Baoshang Bank was taken over
this May by the People’s Bank of China (PBoC) and
the China Banking and Insurance Regulatory Commission (CBIRC)
because it posed a serious credit risk. While discussions for a
formal bank resolution framework were tabled back in 2015, they
have not resurfaced, leading to market uncertainty over other
banks that may crack under liquidity pressures.
As a takeover arrangement, there is no state ownership.
Rather, the PBoC entrusted China Construction Bank to manage
Baoshang’s day-to-day operations for one year. The
principal and interest of all individual...