Regulators in China discuss liquidity issues at Bank of Jinzhou - sources

SHANGHAI, July 24 (Reuters) - Officials from the local branch of China’s central bank and other regulators recently met financial institutions in Liaoning province to discuss measures to deal with liquidity problems at troubled Bank of Jinzhou , sources told Reuters.

The People’s Bank of China introduced a credit risk hedging tool on June 10 for holders of debt issued by the Hong Kong-listed bank, the latest measure by regulators to calm market jitters about the health of smaller banks after a rare state takeover of less-known Baoshang Bank.

However, lingering concerns about liquidity conditions at Bank of Jinzhou, headquartered in Liaoning, prompted regulators in the province to call the meeting, three sources with knowledge of the matter said.

“Many interbank institutions might have blocked Bank of Jinzhou as a counterparty, which will likely wear the bank down. Regulators hope that the market keeps on doing business with Bank of Jinzhou and helps it pull through. So, currently they are discussing measures to resolve its liquidity problem,” one source said.

Another source said one of China’s “big four” state-owned banks was likely to play a role, but added “the plan has not been finalized yet”.

All three sources declined to be identified because they were not authorized to speak about the meeting.

Bank of Jinzhou said in early June that its auditor EY had quit before signing off on the bank’s 2018 accounts, after being unable to agree with the bank on the actual usage of some loans.

Total assets at Bank of Jinzhou stood at 748.39 billion yuan by end-June 2018, while its net profit was up 7.7% year-on-year to 4.3 billion yuan, according to bank’s semi-annual report in 2018. The bank delayed the release of its annual report of 2018. (Reporting by Li Zheng, Hou Xiangming, Cheng Leng and John Ruwitch; editing by Nick Macfie)