Bank of Gansu is set to be the next troubled regional lender to get a state-backed bailout as the government and regulators continue with their campaign to reduce risks in the financial system, reported Caixin.
A rescue strategy for the Hong Kong-listed bank was approved this week by the government of Gansu, a province in northwestern China, Caixin has learned from sources close to the lender. The plan involves a massive capital injection through the sale of new equity to existing shareholders, including the provincial government.. In view of the Gansu provincial government’s weak financial position, the People’s Bank of China (PBOC), the central bank, will offer special loans to help fund the bailout, the sources said.
The plan, which regulators and officials have been working on since September, will also involve the disposal of up to RMB 10 billion ($1.4 billion) of nonperforming assets with losses borne by the provincial government, existing shareholders and new investors, the sources said.
Bank of Gansu, whose balance sheet, profits and key financial metrics deteriorated significantly in 2019, is the latest in a string of regional Chinese lenders to be thrown a lifeline by the government as it intensifies efforts to shore up the banking sector and keep financial risks from spreading through the economy.