* Run on rural bank in Sheyang county began Monday on
* Residents already rattled by rural co-op bankruptcies,
* Officials appealing for calm, reassuring depositors
* Banks usually considered implicitly guaranteed,
insolvencies extremely rare
* Regulators planning to deposit insurance in near future
(Updates with background, local resident comment)
By John Ruwitch
YANCHENG, China, March 26 Rural banks in China's
eastern city of Yancheng stacked piles of cash in plain view
behind teller windows to calm depositors queueing at bank
branches for a third straight day on Wednesday following rumours
that they had run out of cash.
According to residents of Sheyang county, which includes
Yancheng, panic began on Monday with a rumour that a branch of
one local bank turned down a customer's request for a 200,000
yuan withdrawal. Banks declined to comment and Reuters was
unable to verify the rumour.
The affected institutions are tiny compared with the scale
of China's financial sector, and the rush for cash appears to be
an isolated incident so far. Rumours also found especially
fertile ground there after a failure of less-regulated three
rural credit co-operatives last January.
Yet the news caught nationwide attention, reflecting growing
public anxiety as regulators signal greater tolerance for credit
Miao Dongmei, who runs a baby supply store opposite the
branch of the Jiangsu Sheyang Rural Commercial Bank first
targeted by depositors said she kept money at the bank, but did
not join the stampede.
However, she said she had seen other customers carrying
baskets full of cash out of the bank branch, while armoured cars
kept pulling up to deliver fresh loads of currency.
Sheyang bank employees told Reuters that some branches had
been open 24 hours over the past two days.
A visit to one branch showed tellers had stacked bricks of
yuan notes immediately behind the glass, piled above head level,
and assembled cash piles the size and height of a double bed in
the back to show there was enough to go around.
SPREADING SENSE OF CRISIS
Despite repeated appeals from local officials for calm, by
Tuesday the run had extended to another local bank, the Rural
Commercial Bank of Huanghai, residents said.
Earlier on Wednesday police and security guards stood by as
dozens formed a long line outside while an electronic billboard
urged depositors not to be worried by rumours.
The governor of Sheyang county posted a video on the county
government's website on Wednesday, urging depositors not to
"Please be assured that the People's Bank of China and the
rural commercial bank system will ensure the interests of all
depositors will be protected," Tian Weiyou said in the
two-minute video statement.
"The county's rural commercial banks will ensure that there
will be enough funds for depositors to withdraw at any given
Staff at the Sheyang bank were also handing out copies of a
statement dated March 24, endorsed by the local branches of the
central bank and the China Banking Regulatory Commission, as
well as the Zhejiang Sheyang Rural Commercial Bank.
"The Sheyang bank has total deposits of 12 billion yuan
($1.93 billion), the most in Sheyang county; its capital
position is very strong," said the statement.
Huanghai and Jiangsu Sheyang banks declined to comment. An
official at Jiangsu Sheyang referred media inquiries to Yancheng
city's propaganda department.
While insignificant for the wider economy, bank runs in
Sheyang highlight the risk of crises in the sprawling, less
regulated and opaque shadow banking sector, spilling over to the
rest of the financial industry.
Beijing intends to allow market forces to play a greater
role in the economy to cut the wasteful investment that fuelled
the country's breakneck expansion for the past three decades and
so help produce more sustainable and longer-term growth.
The bank runs also highlight the need for regulators to move
quickly with a deposit insurance scheme to prevent isolated
incidents from undermining confidence in the system as a whole.
In Sheyang, residents, many of them elderly, who had lost
money in the collapse of rural credit co-operatives, were some
of the first in line to withdraw cash from banks once the bank
"It's all pretty much elderly people who are taking part in
the bank run," Miao said.
"Like our grandparents generation, they don't have much
money after a lifetime's worth of hard work and they don't want
to be tricked again."
(Additional reporting by Adam Jourdan, Samuel Shen, Natalie
Thomas, Chen Yixin, Gabriel Wildau, and Lu Jianxin in SHANGHAI;
Writing by Pete Sweeney and Fayen Wong; Editing by Mark Bendeich
and Tomasz Janowski)