China’s central bank unveils changes to laws for commercial banks

The headquarters of the People's Bank of China, the central bank, is pictured in Beijing
FILE PHOTO: The headquarters of the People's Bank of China, the central bank, is pictured in Beijing, China, as the country is hit by an outbreak of the new coronavirus, February 3, 2020. REUTERS/Jason Lee

October 16, 2020

BEIJING (Reuters) – China’s central bank issued on Friday a draft of revisions to laws for commercial banks, improving the mechanisms of risk disposal and market exit for lenders, it said, and set a Nov. 16 deadline for public comment on the changes.

In its first revisions to the law since 2015, the People’s Bank of China (PBOC), specified the conditions for commercial banks to file for bankruptcies, and laid out the steps for lenders to take as they seek to restructure or exit the market.

Since 2019, China has faced a growing number of runs on small banks amid economic downturn and financial stress, with the government taking over Baoshang Bank last May in the first such seizure in nearly two decades, citing severe credit risks.

The revisions also set out a risk-mitigating procedure for banks, with steps ranging from risk alerting, mergers and acquisitions, restructurings and takeovers to bankruptcies.

They also provide for regulators to take over banks that no longer operate normally and hurt depositors’ interests, while allowing deposit insurance funds to set up bridge banks to take over or hold the assets and liabilities of such banks.

(Reporting by Cheng Leng, Stella Qiu and Ryan Woo; Editing by Clarence Fernandez)