Liaoning Plans to Merge 12 Local Banks Amid Bad Loan Concerns
What’s new: Northeast China’s Liaoning province plans to merge 12 local city commercial banks to contain financial risks amid a deteriorating economy affected by the pandemic.
The provincial government said it plans to merge the 12 institutions to create a “first-class urban commercial bank” that has a “clear shareholding structure, abundant capital adequacy, tight internal risk control and fine governance.” Strategic investors including the state-owned Liaoning Financial Holding Group and central bank’s deposit insurance fund will be invited to take part in the restructuring, the government said.
The provincial government didn’t elaborate on which banks will be involved in the restructuring. But Caixin learned that they are the smaller ones among the province’s 15 city commercial banks with less than 200 billion yuan ($30.8 billion) of total assets each.
What’s the context: Liaoning’s move followed the central government’s call to encourage smaller banks to boost capital and promote consolidation in the sector to counter rising bad loan risks among small regional lenders.
Several local lenders in the rustbelt province of Liaoning suffered capital crunches last year, including Yingkou Coastal Bank, Bank of Huludao and Bank of Jinzhou, which was rescued with a state-back restructuring.
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