Since May, China has faced a nationwide confidence crisis in small financial institutions after regulators took over Baoshang Bank, dubbing it a “severe credit risk.” It was the first time in 20 years that Chinese authorities had directly assumed control of a private lender.

Baoshang was controlled by Tomorrow Holding Co. Ltd., a conglomerate whose billionaire founder Xiao Jianhua is the subject of a graft investigation by Chinese authorities and has not appeared in public since January 2017.

Regulators must have known long before the takeover that Tomorrow Holding’s sprawling empire illegally controlled a large number of financial institutions, but likely failed to act in a timely manner due to a lack of accountability mechanism, writes Ling Huawei, managing editor of Caixin Media and Caixin Weekly, in an article for the latter publication.

Related: Opinion: Baoshang Takeover Marks Sea Change in China’s Wealth Management Industry

Contact reporter Tang Ziyi (ziyitang@caixin.com)