Since the founding of the People’s Republic of China, thousands of companies have gone bankrupt due to various reasons, but bankruptcies are rare. In many people’s minds, banks are one of the most profitable industries, with a powerful country behind them. As a support, how could the bank fail? But historically speaking, there are not no bankruptcies in the country, and there are only 4 banks that have gone bankrupt. However, compared to the more than 4,000 banks across the country, the proportion of bankrupt banks is less than 0.1%. The probability of such bankruptcy is almost negligible.
In fact, as early as 2015, in order to promote the market-oriented reform of the financial system, our country had already made arrangements for the banks. According to the clear provisions of Article 68 of the Commercial Bank Law, after a bank meets the conditions for bankruptcy, the people's court shall declare it bankrupt in accordance with the law with the approval of the banking regulatory agency of the State Council. However, in the face of bank bankruptcy, many depositors asked what to do with the money they deposited in the bank? In fact, the deposit conditions issued by the central bank have also stated that if the deposit is less than 500,000, the principal and interest will be compensated in full. If the deposit exceeds 500,000, the deposit will have to wait for the result of bankruptcy liquidation, and the compensation will be proportional depending on the situation. This means that after the bank goes bankrupt, there is no good answer yet as to whether large depositors exceeding 500,000 will suffer losses.
Let us first look at a specific case of bank bankruptcy! The first bankrupt bank in China was Hainan Development Bank . The bank was established in August 1995 and terminated in June 1998. The central bank issued an announcement to close it. Hainan Development Bank mainly invested a large amount of credit in the real estate industry. Later, the real estate bubble in Hainan collapsed. Developers had a large number of unfinished buildings, and a large number of depositors came to run on them. The central bank allocated 3.4 billion yuan and failed to reverse the situation. In the end, they had to Declared bankruptcy. However, depositors' deposits have been properly settled.
The second bankrupt bank in China was Shantou Commercial Bank . It was established in 1997 and was ordered to cease operations by the central bank in 2001. The reason is that a series of illegal operations such as high interest rates, misappropriation of funds, and off-book lending have led to a payment crisis and too many bad debts. However, 10 years after the bank went bankrupt, it was reorganized and reopened in 2011 as Guangdong Huaxing Bank . The third bankrupt bank was Hebei Suning Shangcun Rural Credit Cooperative. This bank was also poorly managed and had an excessively high non-performing loan ratio. It was eventually allowed to go bankrupt and liquidated.
The fourth bankrupt bank was the famous Baoshang Bank . Baoshang Bank went bankrupt relatively late and was only declared bankrupt by the central bank in August 2020. The strength of Baoshang Bank is far greater than that of the previous bankrupt banks. Not only is its branches widely distributed in major cities in North China and East China, but at its peak, Baoshang Bank also occupied the top 10 of Asia's top 500 banks. Although it is a relatively strong local bank, it also declared bankruptcy this year a year after it was taken over by the central bank due to high non-performing loans.
Although there are currently four bankrupt banks, the overall bankruptcy rate of the domestic banking industry is still very low. For savers, as long as they do two things, they don’t have to worry about whether their savings deposits can be recovered: On the one hand, if If you have 1 million and are afraid that it will not be safe if you deposit it in a bank, then put the million in several banks. As long as the number of deposits in each bank does not exceed 500,000, even if the bank fails, the depositors' deposits are still guaranteed. On the other hand, depositors are advised to deposit their deposits in the six major state-owned banks or listed banks. Such banks operate more formally and are basically too big to fail. However, so far, whether it is the collapse of Hainan Development Bank or the bankruptcy of Baoshang Bank, the interests of large depositors have not been affected and no funds have been lost.
Some people are now suggesting that after a bank goes bankrupt, residents' savings deposits will be handled by the bank that takes over. So do residents still have to repay their mortgages, car loans, consumer loans, etc. owed to the bank on schedule? In this regard, we believe that even if the bank goes bankrupt, other larger banks will take over, and the debt owed to the bank will still have to be repaid, so don't take chances.If you continue to default on the money you owe to the bank, the bank that takes over will hand over your arrears to the asset management company, and the asset management company will come forward to make the borrower repay the money.
