China's First Bank Seizure Since 1998 Shows Hidden Loan Risk
- Regulators assumed control of Baoshang Bank for one year
- It’s the latest move in China’s campaign against credit risks
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China’s first government takeover of a bank in more than two decades jolted the country’s financial sector on Monday, driving up funding costs and underscoring the potential for increased stress at regional lenders that piled into off-book financing in recent years.
Interbank rates jumped after regulators said late Friday that they would assume control of Baoshang Bank Co. for one year because of “serious” credit risks. While authorities said they would guarantee smaller deposits, they left markets guessing over which of the Inner Mongolia-based lender’s other creditors might face losses.