Updated 7/15/20 Article from Zero Hedge
“…Fast forward to today, when a confluence of the adverse trends that emerged in 2018 and 2019, coupled with the historic economic slowdown in China’s economy, and accelerated by social media-fueled rumors about collapsing banks have sparked what Bloomberg called an ‘unprecedented’ surge of bank runs, forcing regulators and even the police to step in to calm depositors.
According to Bloomberg, in just the past few weeks, worried savers have descended on three banks to withdraw funds amid rumors of cash shortages that were later dismissed as false…
There is probably a reason for why these “rumors” have led to such a dramatic response: they merely bring to the surface whatever most already know, namely that behind its sterling facade, China’s banking system is rotten to the core, with lies upon lies about trillions in non-performing loans, coupled with growing risks from billions parked at China’s unregulated and unstable shadow banking system…
In any case, regulators are now not only seeking to soothe nerves publicly, but are also raising the protection to preserve this cushion for banks. The run in Hebei came after authorities kicked off a pilot program to limit large transactions in the province. The two-year program, which Bloomberg explains is set to be expanded to Zhejiang and Shenzhen in October to encompass 70 million people, would require retail clients to pre-report any large withdrawals or deposits of 100,000 yuan ($14,000) to 300,000 yuan…
…According to S&P, China’s industry may suffer a whopping 8 trillion yuan increase in bad debt this year. Even without this balance sheet “neutron bomb” small banks are facing a $349 billion shortfall in capital, according to UBS analysts, leading to even more small bank failures. Putting that figure at only $50 billion, the regulator said the shortfall could mean slower profit growth or even sliding profits at some institutions.
Meanwhile corporate bonds are also suffering, adding further pressure on banks and hurting corporate funding. According to Bloomberg data, about 80 billion yuan worth of Chinese bonds defaulted on and offshore so far this year, the most in at least three years.
The result of all this, predictably, has been a collapse in confidence in Chinese banks and its logical next step: bank runs.
In the most recent episodes, authorities stepped in last month to halt banks runs at two local lenders in Hebei and Shanxi. On July 11, savers rushed to withdraw money from Hengshui Bank, also based in Hebei, before the police put a stop to it.
In response, the local offices of the People’s Bank of China and the CBIRC did what China does best: they scrambled to preserve confidence in the system, saying in a joint statement that Hengshui Bank and its branches are legitimate financial entities where any savings under half a million yuan are protected under China’s deposit insurance regulation. They also reassured depositors that their money is safe and urged them not to “blindly” withdraw savings.
In fact, they also urged them not to withdraw savings at all.
When that did not work, police took people into custody, issuing reprimands to those spreading rumors, according to the statement.
Meanwhile, as Bloomberg adds, Hengshui Bank said in an emailed reply on Wednesday that the city government is actively dealing with the issue and called for less publicity for fear the incident leads to regional systemic risks. In other words, China is now aggressively censoring any online media that discusses China’s questionably solvent banks.“
Chinese police were arresting people that were discussing the bank’s collapsing in China
Youtube Video Creator predicts that shock waves will be felt globally later this week….
Author: Expat Gal
Expat Gal has been blessed to have known God as long as she can remember. She was raised Catholic and was baptized and confirmed in the Catholic faith. At 21, she left the Catholic faith to become a non-denominational Christian as she began to question some Catholic doctrine. One of her life’s highlights was her family’s lake baptism in 2013. In late March 2015, she received a strong Word from the Lord that your “family is no longer safe here” so she and her family permanently relocated outside the U.S. Her goal is to serve the Lord in any capacity He calls her to serve in.
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