Merger of 12 Commercial Banks in Liaoning Province, China Underway

12 out of 15 Commercial Banks Merge... Asset Scale of Small and Medium Banks Combined
Seemingly Promoted to Stabilize System Ahead of Financial Market Opening

[Asia Economy Beijing=Special Correspondent Jo Young-shin] It has been reported that 12 city commercial banks in Liaoning Province, China, are pushing for a merger.

According to Chinese media Maeil Business Newspaper on the 1st, the Liaoning provincial government recently held a meeting related to the reform of city commercial banks and decided to apply to the central government for a merger plan of 12 banks.

The merger targets are 12 of the 15 city commercial banks in Liaoning Province, excluding the large capital banks Shengjing, Jinzhou, and Dalian. The asset size of the target banks is reported to be between 10 billion and 150 billion yuan (approximately 1.7 trillion to 25.9 trillion KRW). The merger of small and medium-sized banks is being promoted as a measure to suppress risks in the banking system.

The Liaoning provincial government explained the background of the merger, stating, "We will create modern city commercial banks with clear equity structures, abundant capital, and improved management."

The Liaoning provincial government recently reported to the Financial Stability and Development Committee of the State Council about the direction of establishing a new provincial-level bank through the merger, and plans to attract large corporations such as Liaoning Financial Holding Group and the China Deposit Insurance Fund Management Company as strategic investors in the future.

Among the merger targets, Dandong Bank, based in Dandong near the North China border, was sanctioned by the United States and others in 2017 for allegedly serving as a channel for North Korea's illegal financial activities. In 2019, it faced a loan delinquency crisis due to the insolvency of its largest loan customer, Dandong Port Group, the operator of Dandong Port. As of the end of September last year, Dandong Bank's total assets were about 89 billion yuan (15.4 trillion KRW).

Zhao Lian, Chief Researcher at Dongximiao Finance, evaluated that mergers and restructuring are one of the models for city commercial banks to unite and overcome crises. He also advised, "Besides city commercial banks, the speed of mergers and restructuring of rural commercial banks and village banks will also accelerate. Local governments should play an adjustment role, but it must follow market principles and should not attempt to control the banks."

The Chinese government is encouraging capital increases for small and medium-sized banks to mitigate risks in local banks, while also promoting mergers and acquisitions in response to the increase in non-performing loans.

This content was produced with the assistance of AI translation services.