Since 2024, more than 50 banks in China have closed their doors. Industry professionals have stated that the market competition is intense, leading to higher operational risks, prompting a trend of mergers and reorganizations among small and medium-sized bank institutions. This news made headlines on Baidu’s hot search on August 15th, sparking discussions.
According to a report from the Financial Times on August 14th, on July 25th, Dongguan Bank was approved to acquire Dongguan Chang’an Village Bank and establish a branch. In June, Dongguan Rural Commercial Bank was approved for merger with Huizhou Zhongkai Dongying Village Bank and Dongguan Dalang Dongying Village Bank. Also in June, Liaoning Rural Commercial Bank was approved for merger with 36 other rural small and medium-sized bank institutions in Liaoning, and took over the effective assets of these institutions after clearing their bad debts. In April this year, Guangdong Nan Yue Bank was approved to acquire Zhongshan Guting Nan Yue Village Bank and set up a branch in Zhongshan.
According to statistics released by the China Banking and Insurance Regulatory Commission, at least 50 small and medium-sized banks have dissolved since the beginning of this year, except for one city commercial bank, the rest were all rural small and medium-sized banks.
Regarding the trend of mergers and reorganizations among small and medium-sized banks, Liu Chengxiang, Chief Analyst of Banking Industry at Kaiyuan Securities, mentioned that these banks are facing challenges such as insufficient profits, weak asset quality, and limited capital replenishment, leading the financial regulatory authorities to encourage their mergers and reorganizations.
Moreover, some small and medium-sized banks have accumulated certain conflicts and risks in the past, making specific institutions more vulnerable to risks.
In its “China Financial Stability Report (2023),” the People’s Bank of China revealed that in the second quarter of 2023, the central bank ranking results for banking institutions indicated better performance for large banks, while certain rural small and medium-sized financial institutions faced risks. There are 191 high-risk rural cooperative institutions (including rural commercial banks, rural cooperative banks, and rural credit cooperatives) and 132 high-risk village banks, accounting for 0.84% of the total evaluated banks’ assets.
Xue Hongyan, Deputy Director of the Xingtu Financial Research Institute, told the Financial Times that there are numerous legal entities for rural small and medium-sized banks in China, with some lacking talent and scale advantages, facing significant market competition pressures and higher operational risks. The trend of mergers and reorganizations among small and medium-sized bank institutions is evident.
In response, a netizen with the username “Dreams of the Hometown” commented: “In the past when the real estate market was hot, these small banks were doing well, but now with the real estate slump, they can’t survive. It’s good to burst these bubbles in advance.”
Another user, “Bin Brother,” analyzed: “Small banks are all privately owned, only affiliated with a specific bank. In the past, when the environment was good and there were many borrowers, now the banks can’t lend out money, so the small banks couldn’t survive.”
A user named “Tianzishan” believes: “Small banks are being undermined by the major banks’ interest rate cuts. Originally, small banks attracted deposits by offering slightly higher interest rates, and now as the big banks keep reducing their rates, many village banks will struggle to survive in the future.”