Chinese Regulators Take Over Nine FIs

Chinese regulators have seized control of nine financial institutions (FIs) alleging they violated rules and jeopardized the country’s financial system.

The Wall Street Journal reported the China Banking and Insurance Regulatory Commission intervened to take over four insurers, three securities companies and two trust firms that managed a total of 1 trillion yuan ($143 billion) in assets.

In a statement, the commission said it would take control of Huaxia Life Insurance Co., Tianan Life Insurance Co., Tian An Property Insurance Co. and Yian Property Insurance Co.

In addition, the China Securities Regulatory Commission said it seized New Times Securities, Guosheng Securities and Guosheng Futures and two trust firms, New China Trust Co. and New Times Trust Co.

The takeover took effect Friday (July 17) and will last for at least one year, the statement said.

The move represents Beijing’s first significant regulatory action this year and comes on the heels of the bailout of some regional lenders a year ago.

Shen Meng, director at Chanson & Co, a boutique investment bank in Beijing, told the Financial Times that state action was required to solve similar problems throughout the financial system.

“It would be very difficult to solve the problems relying solely on the companies themselves,” Shen told the FT. “Only through a regulator takeover can the problems be forcibly dealt with through administrative measures.”

The regulators insist the takeovers will ensure stability of the firms.

The Chinese government has been forced to take control of several financial institutions who were on the brink of collapse in the past year, according to the FT report. Since May, the state has orchestrated five bailouts of banks.

On Thursday, PYMNTS reported China’s economy expanded 3.2 percent in the second quarter compared to the same period a year ago. The increase represented a dramatic turnaround compared to first quarter losses of nearly 7 percent.

China’s second-quarter economic growth led to an 11.5 percent rebound from the first three months of the year. Taken together, China’s economy slid just 1.6 percent when compared with the first half of 2019, according to China’s National Bureau of Statistics.