At the moment, the top shareholder of the distressed Hong Kong-listed lender is China’s biggest bank which has made it clear that the state is working on rendering financial support to the struggling banks in the country. “Industrial and Commercial Bank of China” has announced that one of its subsidiaries is planning on investing approximately Rmb3bn in Bank of Jinzhou by captivating a stake of about 10.82%. The investors are currently very worried over the state of the Chinese banking system in the upcoming weeks after the government took over Baoshang Bank, which is the first incident to be observed in the last 2 Decades. In case of the fear of a financial system crash, the large state institutions generally came forward to help save distressed companies or banks.
ICBC announced that the investment in Jinzhou is expected to save national supply-side reform. The current departure of Baoshang has got many investors and money market traders questioning if there are more troubled lenders like Jianhua that need the same treatment. There are discussions going on that the Bank of Jinzhou require restructuring as the infectivity of fears and concerns regarding the state of China’s financial system is only surging upwards. The bank has not disclosed any annual details in 2018 as requisite by disclosure norms in Hong Kong. At the end of May, the bank’s auditor Ernst & Young Hua Ming had resigned after they found the bank’s loans provided to the institutional clients not used for the concerned duties. The bank’s credit quality is now being questioned after the news of the customer’s ability to service the loans surfaced.
Jinzhou’s interbank borrowings are now being investigated and resolved. During the same time, the People’s Bank of China supported a negotiable certificate of deposit from Jinzhou as a step to help other financial institutions flourish easily lending to it. From the past few years, Bank of Jinzhou’s coverage with troubled companies is very well known. The bank was earlier in the news for lending $440m to formerly successful Chinese solar organization, Hanergy, which had its share value dropped dramatically back in 2015. The fall has been assumed to be its bad business model wherein the major part of its revenue came from the sales to its mother company. China’s leadership is currently focusing on maintaining financial stability as the disturbance in the banking systems is predicted to hamper the economic growth and trigger unemployment plus instability.