Recently, the Chinese Communist authorities announced the takeover of a private bank for the first time, citing “serious credit risks” at the bank. Experts believe that the CCP’s “discriminatory and strict management” of private banks has led to a crisis in their operation, depriving them of room for development. The takeover incident also illustrates that the CCP’s approach to resolving financial issues is merely a temporary fix.
The China Banking and Insurance Regulatory Commission announced on July 3 that it would take over the Wuhan Zhongbang Bank, which is facing “serious credit risks,” for a year, with specific operations to be handled by the Hankou Bank.
On the same day, Hankou Bank issued a statement saying that Zhongbang Bank would continue its normal operations and that the rights of depositors would be protected.
Established in 2017, Zhongbang Bank is the first private bank in Hubei Province and the 11th in China, positioning itself as an “internet transaction bank” relying on online loans and cooperation with lending platforms. The bank’s total assets were approximately 123.5 billion yuan by the end of 2024.
The size of China’s lending market exceeded 35 trillion yuan in 2024, becoming an essential component of consumer credit.
The last time the CCP took over a commercial bank was the 2019 Baoshang Bank incident, also due to “serious credit risks.” The Zhongbang Bank incident is the first involving a private bank.
Prior to the takeover, Zhongbang Bank had frequently reported rising non-performing loan ratios, frozen shareholder equity, and had not yet released its 2025 annual report.
Chinese issues scholar Wang He told Epoch Times that the “main reason” for Zhongbang Bank’s “serious credit risks” was the “new lending regulations” issued by the CCP in October 2025.
He explained that internet banks like Zhongbang Bank typically lend through lending platforms, with past lending interest rates often as high as 36%. The risks of these high-interest loans were usually borne by the lending platforms.
The “new lending regulations” enacted in October last year stipulated that high-risk borrowing could not be outsourced. Therefore, Zhongbang Bank had to shoulder these risks on its own. Without “implicit guarantees,” the bank’s bad debts suddenly emerged, causing the first impact.
The second impact was that the “new lending regulations” required annualized interest rates to be capped at 24%, down from the previous 36%, significantly reducing the bank’s income.
The third impact was that in the past, the bank could offer high-interest loans and attract deposits with high-interest rates. However, with the sharp decline in interest margins, the ability to attract deposits with high rates diminished, posing a significant challenge to the bank’s funding sources.
“These factors have led to a steep decline in Zhongbang Bank’s operation, culminating in the crisis we see today,” Wang He said. “Therefore, it is the ‘new lending regulations’—the CCP’s regulation of internet banks—that directly and primarily caused Zhongbang Bank’s crisis and subsequent takeover.”
Hankou Bank’s announcement regarding equity protection indicates that personal deposits at Zhongbang Bank will be fully protected in terms of both principal and interest; for public deposits and interbank liabilities, those below 50 million yuan will be fully protected, while those above 50 million yuan will be handled according to a plan.
American economist David Huang told Epoch Times that Zhongbang Bank’s assets are relatively small, much smaller than systemic large banks. “It’s not too big to fail.” The CCP preemptively took over Zhongbang Bank, similar to its handling of the 2019 Baoshang Bank incident, bringing in a “big player”—Hankou Bank—as a “scapegoat” to ensure “overall political and financial stability.”
Baoshang Bank’s total assets reached around 550 billion yuan by the end of 2018.
Huang believes that the CCP’s claim to protect depositor interests is just its “standard risk control measure” to prevent risks from spreading.
Wang He believes that the CCP may also have learned lessons from the 2022 Henan Village Bank incident, so this time they acted more swiftly to prevent depositor panic and potential societal bank runs or crises.
In the Henan Village Bank case, nearly 40 billion yuan in depositor funds were illegally transferred, affecting the interests of about 400,000 depositors and leading to years of related lawsuits and protests.
Wang pointed out that the CCP’s full protection of personal deposits actually only applies to those below 500,000 yuan. He said, “It’s difficult to say for deposits above 500,000 yuan.” He added, “How to deal with deposits over 500,000 yuan is a problem. Last time, in the case of the Henan small and medium-sized bank, this was not resolved and caused a significant uproar, so the situation with Zhongbang Bank needs further observation.”
Huang noted that a considerable portion of China’s small and medium-sized banks are currently facing “financial fragility,” which is related to the overall economic downturn in China. The six major initiating shareholders of Zhongbang Bank are all privately-owned businesses in Hubei province, and they have also been affected by economic slowdown, with many of them facing debt difficulties. This has significantly undermined the banks’ ability to replenish capital and manage risks and has affected corporate governance.
He believes that after the takeover of Zhongbang Bank, “the situation can be temporarily stabilized in the short term,” but in the medium to long term, the takeover itself is more like a surgical operation rather than addressing the fundamental issues in the Chinese financial system.
He cautioned, “If the fundamental problems are not resolved in the long term, such situations will continue to occur.”
Wang He believes that Chinese private banks face “discrimination and strict management” from the CCP system, leaving them with virtually no room for development.
Currently, China has only 19 private banks with a total asset size of about 21.5 trillion yuan, accounting for 0.5% of the total assets of the banking industry in China and 0.4% of the total number of banks.
Wang said that China’s banking industry is dominated by “state ownership,” with private banks and foreign banks in China only occupying a small niche. “This extremely small scale cannot support development.”
Simultaneously, “the state’s strict control and regulation of banks are very stringent, severely limiting private banks’ space. They have relied on internet finance for some development in the past, but the CCP immediately halted it.”
“At present, the regulation and nationalization of the entire Chinese financial system have made life very difficult for private banks, especially for private internet banks. From the current perspective, they have almost no room for development,” Wang said.