EmbattledBaoshang Bankhas been recognized as insolvent by regulators and will not repay a RMB 6.5 billion ($983.7 million) bond or related interest, reported Caixin.
The regional lender said it would write down the full principal of the tier-two capital bond and not pay the remaining due interest worth RMB 585.6 million, according to its Friday filing to the National Interbank Funding Center, an entity under the central bank.
The write-down was triggered by the fact that Baoshang Bank was “seriously insolvent and unable to survive,” as confirmed by regulators during the state takeover, the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBRIC) said in a joint notice dated Wednesday.
“Both the scales of issuance and demand for tier-two capital bonds are relatively large, but most investors may not be aware of risks associated with such bonds. The (Baoshang Bank) case will make them more vigilant,” a senior employee at a joint-stock bank’s financial market department told Caixin.