China has had to nationalize and bail out a third troubled regional lender, HengFeng Bank, which has about $200 billion in assets. This continues to raise questions about the stability and health of China’s banking system:
China’s sovereign wealth fund has taken over HengFeng Bank, a troubled lender linked to fugitive financier Xiao Jianhua, in the third case in as many months of the state exerting its grip over wayward financial institutions.
Central Huijin Investment, a subsidiary of the China Investment Corporation that acts as the Chinese government’s shareholder in the country’s four biggest banks, has emerged as a strategic investor in HengFeng, according to a brief report overnight by Shanghai Securities News, published by state news agency Xinhua.
The investment was a breakthrough in HengFeng’s debt restructuring led by the Shandong provincial government, the state-owned newspaper said, without citing a source or providing financial details. Huijin’s investment would increase HengFeng’s capital adequacy, improve the troubled bank’s management and enhance its operational capability, the paper said.
HengFeng, based in Yantai city, was founded in 1987. It operated 18 branches and 306 sub-branches across the country. It is among more than a dozen city-level and rural lenders that had been put on notice by the authorities for a shake-up, as regulators step up their programme of cleaning up financial malfeasance and profligate lending.
Zero Hedge has more details here. At the link is a list of other regional Chinese lenders thought to be in trouble.