Fears over China's smaller banks trigger second bank run in less than two weeks

BEIJING (Reuters) - The government of a Chinese city sought to assure depositors of a local bank’s financial health on Wednesday in the wake of the country’s second bank run in two weeks, triggered by fears over ill management and liquidity issues at smaller lenders.Yingkou Coastal Bank, a city commercial bank based in northern Liaoning province, received a large volume of over-the-counter requests from depositors to withdraw cash on Wednesday after “untruthful rumors about the bank’s deep financial crisis spread online”, according to a post by the police in Yingkou city on their official social media.

“Please be at ease. All of our depositors’ money at Yingkou Coastal Bank is safe,” the Yingkou city government said in a separate post on the local police’s social media account.

“Please be responsible for your own interests, do not believe rumors and avoid unnecessarily losses by withdrawing cash blindly.”

The Yingkou bank has sufficient assets, and its operations and management are in good standing, the Yingkou government said.

The bank could not be reached for additional comment outside of business hours.

Earlier this year, a rare government seizure of then little-known Baoshang Bank and a state-rescue of Jinzhou Bank and Hengfeng Bank revived concerns about the true health of hundreds of small lenders in the country as China’s economic growth slowed to nearly a 30-year low.

Yingkou police said they had detained one “trouble maker” suspected of disrupting public order in the course of its investigation on Wednesday.

The police and the local government didn’t specify the nature of the rumor spread about Yingkou Coastal Bank.

Less than two weeks ago, depositors rushed to take out cash from Yichuan Rural Commercial Bank in central Henan province, amid a corruption investigation into the bank’s former boss.

Set up in December 2010, Yingkou Coastal Bank has 20 branches in Yingkou city, according to its website. A unit of the HNA Group conglomerate owns 14.6% in unlisted Yingkou Coastal Bank, according to its bond issuance documents. Huajun Holdings, a private investment holding company, is the second largest shareholder, which holds a 13.9% stake in the bank.

Reporting by By Cheng Leng and Ryan Woo; Editing by Kirsten Donovan