About 99.98% of Baoshang Bank’s corporate creditors have had their claims fully guaranteed after the People’s Bank of China (PBoC) seized the private bank due to credit risk, according to the People’s Bank of China, reported Caixin.
The remainder — as well as some large interbank creditors — had an average of 90% of their claims guaranteed.
A PBoC official said the high guarantee ratios came from the fact that the fund management company purchased Baoshang’s assets and liabilities to fully take over the bank instead of simply bankrupting and liquidating it. If it had done the latter, depositors of all kinds would only be guaranteed up to RMB 500,000 ($72,193) each.
Not all creditors were fully guaranteed because doing so would encourage financial institutions to invest in illegal high-interest products without conducting solid risk assessments, the official said.