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The takeover of a commercial bank for the first time in nearly two decades highlights the urgency of banking reform in China.
China's Banking and Insurance Regulatory Commission (CBIRC) took control of Mongolia's Baoshang Bank in May, citing "serious credit risks." The move unnerved domestic markets and forced the People's Bank of China (PB°C) to deliver an infusion of cash to the banking system.
The takeover of Baoshang, which had RMB576 billion ($83.9 billion) in assets as of the third quarter of 2017 (the bank's most recent financial disclosure), is the first such move in 18 years. While Chinese officials characterized Baoshang as a unique case, the public takeover comes in the midst of Beijing's push for more bank lending to mitigate the country's economic slowdown, exacerbating worries about the stability of smaller lenders amid rising debt and bad loans.
"At present, small and mid-sized banks are operating smoothly, liquidity is relatively ample and overall risks are fully manageable," the CBIRC said in Financial News, an official publication of the PB°C.
But in June, for...