The head of China’s central bank warned that some regional lenders had “overstretched” themselves and said their major shareholders they would face “primary responsibility” for any future bank failures.
Yi Gang’s comments mark the first time that he has spoken in detail about the risks brewing in China’s banking sector since the People’s Bank of China seized Baoshang Bank in May. Since then Jinzhou Bank and Hengfeng Bank, two other large regional lenders, have also been bailed out by the country’s biggest bank and China’s sovereign wealth fund respectively.
“Some banks have been overstretching themselves beyond the regions they are supposed to serve and shifting their resources to high-risk fields,” Mr Yi said at a press briefing. “We have asked small and medium-sized banks to focus on the real economy by providing services to local clients. Otherwise their business won’t be sustainable and they won’t be able to resolve their financial risks.”