Financial institutions

China’s central bank says 93% of financial institutions ‘safe’ after violent Henan scandal erupts

China’s central bank issued an assurance that despite a recent scandal With local lenders in Henan province freezing withdrawals, 93% of more than 4,000 financial institutions surveyed at the end of last year were found to be “safe”, along with almost all of their assets.

Financial risks in the country are “generally controllable”, Sun Tianqi, head of the People’s Bank of China (PBOC) Financial Stability Office, said at a press briefing on Wednesday, in response to a question from a journalist on the question of whether the Henan case could trigger risks throughout the financial and banking system.

The reassurance came as four village banks in central Henan province and two in neighboring Anhui province have blocked customers across the country from withdrawing their savings since mid-April.

After a protest outside the central bank branch in Zhengzhou, the capital of Henan, turned violent on Sunday, financial regulators announced a plan the next day to gradually reimburse some depositors.

Of the 4,398 banks and nonbank financial institutions the PBOC rated in the fourth quarter of last year, 4,082 fell “within safe limits”, Sun said, citing ratings released in March. The assets of these “safe” institutions accounted for 99% of the total rated institutions, he said.





 

The central bank’s quarterly ratings classify financial institutions into 11 categories: level 1 to 10, and the worst rating, level D.

A rating of level one to five indicates that the institution is in the “green zone”, a rating of level six or seven the “yellow zone”, while a rating of eight to 10 or D places an institution in the “high risk area”. red zone,” according to the PBOC.

The institutions rated in the fourth quarter were 24 large banks, 3,997 small and medium banks and 377 non-bank institutions, such as leasing companies and consumer finance companies.

Rural cooperative institutions—composed of rural commercial banks, rural cooperative banks, and rural credit cooperatives—and village banks received the worst ratings during this period. Of the 2,161 rural cooperative institutions and 1,649 village banks that were rated, 186 and 103 were rated “high risk” respectively. They represented 91% of the 316 high-risk financial institutions.

High-risk financial institutions were mainly concentrated in four provinces, the PBOC said, without naming the regions.

Contact reporter Zhang Yukun ([email protected])

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