2014-03-25

Small Bank Run in China

Fear remains elevated. The bank in question was the subject of rumors, not any real information (though some may come to light in the coming days).

This is the downside to controlling information and always putting out the good news. When people become fearful in China, they do not trust the media or government. Rumors spread like wildfire.

Collapse rumours spark panic and run on small Chinese bank
Hundreds of people rushed on Tuesday to withdraw money from branches of two small Chinese banks after rumours spread about solvency at one of them, reflecting growing anxiety among investors as regulators signal greater tolerance for credit defaults.

The case highlights the urgency of plans to put in place a deposit insurance system to protect investors against bank insolvency, as Chinese grow increasingly nervous about the impact of slowing economic growth on financial institutions.

Regulators have said they will roll out deposit insurance as soon as possible, without giving a firm deadline.

Domestic media reported, and a local official confirmed, that ordinary depositors swarmed a branch of Jiangsu Sheyang Rural Commercial Bank in Yancheng in economically troubled Jiangsu province on Monday.

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