Another Chinese regional lender has become the second in a matter of a few months that has needed bail-out assistance and regulatory scrutiny from the Chinese state. This turn of events is concerning in light of the significant size of the Chinese shadow banking sector (Bloomberg claims this sector is saddled with $10 trillion of debt), that if imploded, could strain the global financial system. Although these banks mentioned so far are small in comparison to the massive players in the Chinese banking sector, they could be the canaries signaling systemic risk.
The first, Baoshang Bank, was bailed out directly on the 7th of June by the Chinese central bank, PBoC (People’s Bank of China) while the Bank of Jinzhou has recently put out a press release (full below) that announces 17% of it’s shares being transferred to large state-controlled banks.
Bank of Jinzhou’s official press release;
“This announcement is made by Bank of Jinzhou Co., Ltd. (the “Bank”, together with its subsidiaries, the “Group”) pursuant to Rule 13.09(2)(a) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).
Reference is made to the announcement of the Bank dated 25 July 2019. On 28 July 2019, the board of directors of the Bank (the “Board”) received notice from certain shareholders of the Bank (the “Shareholders”), including China Enterprise Development Investment (Beijing) Co., Ltd.* (中企發展投資(北京)有限公司), that they transferred part of the domestic shares of the Bank held by them to ICBC Financial Asset Investment Co., Limited (工銀金融資產投資有限公司) (“ICBC Investment”), Cinda Investment Co., Ltd. (信達投資有限公司) (“Cinda Investment”) and China Greatwall Assets Management Co., Ltd* (中國長城資管理股份有限公司) (“China Greatwall AMC”) under the support and guidance of the local government and financial supervising authorities, and the relevant parties have already entered into conditional share transfer agreements regarding such transfers (the “Share Transfer Agreements”). To the best knowledge of the Bank and as at the date of this announcement, the domestic shares of the Bank being transferred to ICBC Investment and Cinda Investment shall represent 10.82% and 6.49% of the total issued ordinary shares of the Bank, respectively.
“The Board believes that the investment of ICBC Investment, Cinda Investment and China Greatwall AMC will further improve the Bank’s corporate governance level and its ability to manage and resist risks, and will drive the future development of the Bank. The Bank will comply with the requirements under the relevant laws and regulations in relation to such transfers, including the application for the approval of China Banking and Insurance Regulatory Commission Liaoning Bureau, the registration for the change of shareholders and the disclosure of information.
“The Bank will make further announcements in compliance with the relevant laws and regulations as and when appropriate.”