Caixin
Jul 29, 2022 05:27 AM
FINANCE

Politburo Vows to Resolve Village Bank Risks

What’s new: China’s Politburo, the top ruling body of the Communist Party led by President Xi Jinping, vowed Thursday to maintain the overall stability of the financial market, properly resolve risks related to some local rural banks and severely crack down on financial crimes.

It was the first official statement from top policymakers on the issue since a half-dozen village banks in Henan and neighboring Anhui province in mid-April denied customers’ access to tens of billions of yuan of deposits.

While authorities are investigating allegations of criminal fundraising as the banks attracted deposits from all over China by offering lucrative returns, local financial regulators announced a plan to reimburse certain depositors earlier this month.

On July 25, a second batch of customers of five village banks in Henan and Anhui received reimbursements. A customer told Caixin that the payment came in more smoothly than the first batch. Depositors generally said they expected the repayment process to accelerate after the Politburo voiced its stance on the matter.

The background: The scandal came to light in April, when Yuzhou Xin Min Sheng Village Bank, Tuocheng Huanghuai Village Bank, Shangcai Huimin Village bank and Kaifeng Xin Dong Fang Village Bank in Henan province as well as two other village banks in Anhui suspended online banking.

Initial investigations found that a criminal group led by the controlling shareholder of private company Henan Xincaifu Group Investment Holding Co. Ltd. is suspected of using the village banks to carry out illegal deposit-taking since 2011. The gang is thought to have gained control of the lenders through illicit means, sold financial products through their own platform and set up shell companies to conceal information, the police said.

Authorities arrested several dozen people linked to the scandal. At least three officials from Henan and local banking regulators are also under investigation, according to Henan graft busters.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)

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