Chinese central bank calls for calm after Baoshang takeover By Reuters

By Andrew Galbraith

SHANGHAI (Reuters) – The Chinese central bank tried to calm investors on Sunday after the takeover of Inner Mongolia-based Baoshang Bank, saying regulators were not considering such initiatives for the time being.

The China Banking and Insurance Regulatory Commission (CBIRC) took control of Baoshang on May 24, undermining Chinese markets and prompting the People's Bank of China (PBOC) to inject liquidity into the banking system.

In response to concerns that regulators were planning more takeovers of financial institutions, the PBOC said Sunday that Baoshang was a stand-alone affair.

"Everyone, please, do not worry, at the moment we do not have this plan yet," he said in a statement posted on his website.

The PBOC also stated that it would use a variety of monetary policy tools to stabilize money markets and boost liquidity in the banking system, although not mentioning broader easing.

"The PBOC has fully estimated and prepared the various factors that will affect liquidity in June, and will flexibly utilize the reverse repurchase agreements and medium-term loan facility based on the market situation in the future." 39, supply and demand for cash "said in a statement.

The central bank had previously pledged to strengthen its political support for the economic downturn, but PBOC Governor Yi Gang said there was less room for further monetary easing.

The PBOC announced on Sunday that its relatively low reserve requirements for small and medium-sized banks would increase their liquidity, while a previously announced progressive reduction was expected to release 100 billion yuan ($ 14.5 billion) in long-term liquidity medium term. – and small banks on 17 June.

The PBOC stated that the deposit guarantee funds and its own funds provided sufficient guarantees to all types of creditors of Baoshang Bank as a result of the repurchase, which would have been caused by the abusive and illegal use of the bank. Bank funds by Tomorrow Holdings, which holds 89% of the capital. Baoshang shares, resulting in a severe credit crisis in the bank.

All personal accounts and interbank debts of less than 50 million yuan would be guaranteed, said the PBOC, adding that the average debt guarantee ratio of more than 50 million yuan would be "about 90%".

Last week, Chinese regulators gave instructions to banks, which could see up to 30 percent of larger creditors facing a haircut, sources told Reuters.