Select Language:
Over the past month, one of the nation’s largest state-owned commercial banks has acquired hundreds of local rural bank branches in northeastern Jilin province. Industry experts believe this move could establish a new precedent for addressing risks within the rural credit sector.
This extensive integration of rural banks marks a groundbreaking effort since regulators introduced a new wave of reforms aimed at mitigating risks in grassroots financial institutions, according to Dong Ximiao, chief researcher at Zhaolian and deputy director of the Shanghai Finance Institute for Development.
On October 12, the National Financial Regulatory Administration’s Yanjian Branch approved the bank’s purchase of 102 branches from two rural commercial banks in Jilin’s Yanbian Prefecture. Additionally, on September 29, the bank received approval to acquire 88 branches from three rural commercial banks located in Changchun, Yanbian, and Baishan.
“Major commercial banks possess substantial capital, expertise in finance, technological strengths, and comprehensive risk management experience,” Dong explained. “Their direct involvement in resolving issues at rural small and medium-sized banks creates a powerful external force for rural financial stability.” He emphasized the importance of regulators analyzing this model and encouraging its replication across the country.
Nevertheless, a senior financial analyst warned that scaling this reform depends on balancing its effects on the bank’s profitability and risk capacity. “This market-oriented strategy could serve as an additional measure within the broader effort to reform rural credit systems, but it requires further refinement,” the analyst noted.
According to the 2022 reform plan outlined by China’s financial stability bureau, approximately 100 high-risk financial institutions are expected to be closed or acquired by the year’s end. Most of these are situated within rural credit cooperatives and village banks, Dong added.
ChatGPT
Perplexity
Gemini AI
Grok AI
