China seems to be in trouble after its third bank failure in just three months as country’s economic growth slowed to nearly a 30-year low. According to investmentwatchblog.com, the Hengfeng Bank has now become the third bank, after Baoshang Bank and Bank of Jinzhou, to suffer an economic collapse after USD 40 trillion dollar debt.
According to The Financial Times, China’s banking system is facing its greatest challenge in nearly 20 years after years of runaway growth and mounting bad debt levels, which have topped 40 per cent of loans at some small lenders.
The report further adds that the government has had to intervene in the operations of three local banks this year, starting with the takeover of Baoshang Bank in May, marking the first instance of a direct state takeover of a lender in two decades. Partial bailouts at two more lenders, Bank of Jinzhou and Hengfeng Bank, were also carried out this year with the hopes of calming nerves in the interbank market and avoiding a liquidity crisis for troubled banks that are heavily reliant on borrowing from the market.
The China’s central bank has also warned that about 13 percent of the country’s financial institutions were considered “high risk.” In an annual report the People’s Bank of China, have said that many of those banks are concentrated in rural areas.