CBIRC Approves State-backed Bailout of Bank of Gansu

Source: Regulation Asia Editors, Regulation Asia 2020-07-20

The CBIRC has approved the issuance of new shares to help Bank of Gansu raise its core tier 1 capital. Four state-owned companies will subscribe to the new shares.

The CBIRC (China Banking and Insurance Regulatory Commission) has approved a formal request from Bank of Gansu to increase its core tier 1 capital through the issuance of new shares.

The approval is part of a rescue strategy for the regional lender approved by the Gansu provincial government in April. The PBOC (People’s Bank of China) is also expected to provide funding to the Gansu government to help fund the bailout.

The CBIRC has approved the issuance of 3.75 billion new yuan-denominated shares and 1.25 billion Hong Kong dollar-denominated H-shares through a private placement, where all net proceeds should be used to supplement core tier 1 capital.

“Your bank should strengthen equity management, optimise equity structure, strictly control shareholder related transactions, improve corporate governance and internal control mechanisms, and prevent and resolve risks,” the CBIRC said in a statement.

According to Caixin, four companies controlled by the Gansu provincial government – all current shareholders of Bank of Gansu – will subscribe to the new shares.

Bank of Gansu’s balance sheet and key financial metrics deteriorated significantly in 2019. At the end of March, the bank reported an 85% year-on-year drop in full-year net profits, prompting a run on the bank.

As of end-December, Bank or Gansu’s core tier 1 capital adequacy ratio had fallen to 9.92% from 11.01% a year earlier, against a minimum requirement of 7.5%.

The bank’s NPL ratio had also risen to 2.45% from 2.29% a year earlier, against the industry average of 1.86%.

CBIRC

Bank of Gansu

CBIRC Approves State-backed Bailout of Bank of Gansu

Subscribe to Our Newsletter!

Subscribe to Our Newsletter!