- Firm last year became China’s first bank seizure since 1998
- PBOC said in August that Baoshang would file for bankruptcy
China’s banking regulator has given Baoshang Bank Co. the nod to start bankruptcy proceedings, launching an unraveling process that has not been seen for at least two decades.
The China Banking and Insurance Regulatory Commission said it agrees in principle for Baoshang Bank to enter bankruptcy and asked the company to report to the regulator in the event of any “major situations,” the regulator said in a statement dated Nov. 12 and made public on Monday.
China’s surprise takeover of Baoshang Bank in May 2019 jolted markets as authorities imposed losses on some creditors, upending long-held assumptions of a government backstop. The move highlighted the difficult balancing act faced by Chinese regulators as they try to clean up risky lending practices without triggering a loss of faith in banks that might damage the world’s second-largest economy.
The People’s Bank of China said last April that Huishang Bank and the newly established Mengshang Bank will take over most of Baoshang Bank’s remaining operations, assets and liabilities. The central bank said in August that Baoshang would file for bankruptcy.
As part of its unwinding, Baoshang said earlier this month it planned to write off a $980 million subordinated capital bond after it was deemed a non-viable entity by regulators.
Baoshang was part of the investment conglomerate led by financier Xiao Jianhua which was known as the Tomorrow Group. Chinese regulators in July said they will assume control of nine financial firms linked to Xiao, who was taken from a hotel in Hong Kong by Chinese authorities in 2017 and hasn’t been seen in public since.