Chinese authorities are to start repaying most of the victims in the nation’s biggest bank scam after hundreds of angry customers took to the streets again over the weekend to ratchet up pressure on the government.
Clients from the four rural banks in the central province of Henan and one in Anhui would be repaid “in advance” starting on Friday, according to statements by local branches of the China Banking and Insurance Regulatory Commission.
Individuals with deposits of up to 50,000 yuan (US$7,423) would be repaid first, with arrangements for the rest subject to further notice.
Hundreds of bank customers protested on Sunday after similar demonstrations broke out in May and again in late last month in Zhengzhou, a city of about 10 million people, calling on the authorities to return tens of billions of yuan of deposits in a suspected scam.
That has prompted the banking watchdog to speed up drafting a plan to resolve risks even as a police investigation is still ongoing.
“The latest move shows the local government is trying to maintain social stability by advancing a small amount of payments out of their pockets,” China Merchant Securities Co (招商證券) chief bank analyst Liao Zhiming (廖志明) said.
He expected future large-sum payments to some clients would not be made in full, because the funds are not considered as deposits and would not be protected by the nation’s deposit insurance scheme.
An official probe into the case had found that Henan Xincaifu Group Investment Holding Co (河南新財富集團), a private investment firm with stakes in the five lenders, colluded with bank employees to take deposits and marketed financial products via online platforms, and then transferred the money by fabricating lending agreements.
Accounts were frozen as part of the investigation and depositors have been protesting since May, because they have been unable to access their savings.
Videos circulating online showed protesters on Sunday at a branch of the People’s Bank of China in Zhengzhou, the provincial capital of Henan, charged by a column of people who appeared to be plainclothes officers.
The demonstrators hurled water bottles, tussles broke out, and at least one person was kicked and tackled. Another clip showed protesters holding up signs and shouting: “Return my money.”
Still, it is not clear whether the latest proposal will quell the outcry. Some customers with deposits exceeding 50,000 yuan are still concerned they might not get full payments.
The banking regulator said it would not make repayments for accounts that are suspected to have involved illegal activities or received high interest from other channels, according to the notices.
Most customers received an annual interest rate of about 4 percent from their deposits or investments in this case, which is in line with returns on wealth management products offered by other Chinese banks.
While the case is unlikely to have any spillover effect into the broader Chinese banking sector because rural banks make up less than 1 percent of the industry’s total assets, “inappropriate handling of the issue could result in social unease and threaten stability,” Australia and New Zealand Banking Group Ltd senior China economist Betty Wang (王蕊) wrote in a note yesterday.
“This can be particularly sensitive in the aftermath of local [COVID-19] lockdowns and ahead of the 20th [Chinese Communist] Party Congress,” she wrote.
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