Since April 18, many depositors have been unable to withdraw their money from several rural banks in Henan.

As reported by Yicai, Xuchang Rural Commercial Bank is the largest shareholder of those banks. Therefore, it is responsible for the incident.

According to media reports, the case involves 400,000 depositors and about 40 billion yuan (6 billion dollars) in deposits.

On May 20, regulators stated that major shareholders of these village banks used third-party platforms or capital brokers to absorb public funds. As a result, they are suspected of crimes and placed under investigation.

New Fortune Group is reportedly a major shareholder of these banks. However, its boss had fled overseas with the money. 

Data released from the information query platform Tianyancha shows the company was canceled on February 10.

Nevertheless, it’s been found that Henan New Fortune is not the largest shareholder. Instead, it’s Xuchang Rural Commercial Bank. Tianyancha indicates that Xuchang holds from 20.5% to 51% of five Henan rural banks, making it the dominant shareholder. 

Joe Zhang, the author of 2013’s “Inside China’s Shadow Banking: The Next Subprime Crisis,” says China is generally overbanked.

Zhang adds, “Some small and mid-sized banks were put together quickly, and some have ulterior motives such as making loans to themselves. Governance is a problem. Risk control is another problem.”

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