SHANGHAI, March 25 Hundreds of people rushed to
withdraw money from a branch of a small Chinese bank on Monday
after rumours spread about its solvency, local media reported,
reflecting growing anxiety among investors as regulators signal
greater tolerance for credit defaults.
The incident occurred at a branch of Jiangsu Sheyang Rural
Commercial Bank in Yancheng in Jiangsu province, about 300 km
(185 miles) north of Shanghai, the semi-official China News
Service reported late on Monday.
Bank chairman Zang Zhengzhi was quoted saying the bank would
ensure payment to all the depositors. The report did not say how
the rumour originated.
Jiangsu Sheyang Rural Commercial Bank is subject to formal
reserve requirements, loan-to-deposit ratios and other rules to
ensure they keep sufficient cash on hand.
Depositor sentiment in Yancheng was rattled in January, when
some local rural cooperatives -- which are not subject to the
supervision of the bank regulator -- ran out of cash and locked
That news was followed by China's first domestic bond
default by a Shanghai-based solar power company in March, which
negatively impacted wider sentiment in Chinese credit markets.
Local media have also reported a heavily indebted real
estate developer in Zhejiang province was at risk of defaulting
on 3.5 billion yuan ($565 million) worth of loans -- a situation
that has yet to be resolved.
When contacted by Reuters by phone on Tuesday, an official
at the Jiangsu Sheyang Rural Commercial Bank branch hung up,
saying she was busy.
An official at the administrative office at Jiangsu Sheyang
Rural Commercial Bank said the bank would publish a statement
shortly. On its website, the bank says it is capitalised at 525
million yuan ($85 million) and had total deposits of 12 billion
yuan as of end-February,
Officials at the Jiangsu branch offices of the China Banking
Regulatory Commission (CBRC) declined to comment. The Yancheng
branch of CBRC and the propaganda offices in Yancheng city and
Sheyang county did not answer calls seeking comment.
Until now, Chinese banks have operated under an implicit
government guarantee that has largely prevented them from going
bankrupt and has protected depositors in the rare cases when
they have. Regulators are expected to unveil a formal deposit
insurance scheme this year.
Ahead the Lunar New Year holidays in late January, at least
three rural cooperatives in Yancheng ran short on funds,
prompting what the local government described as a panic as
depositors rushed to withdraw cash. Local officials say several
co-op bosses fled after committing fraud.
($1 = 6.1888 Chinese Yuan)
(Reporting by Gabriel Wildau, Xu Yong, Pete Sweeney, Samuel
Shen, John Ruwitch and Shanghai newsroom; Writing by Kazunori