China ramps up reform of smaller lenders

Market exits, mergers, tighter rules to reshape regional banking landscape

China has accelerated reforms and risk management practices among small and medium-sized financial institutions this year as policymakers push to build stronger, more resilient lenders that are better rooted in local markets and more effective in supporting the real economy.

One of the main approaches to restructuring small and medium-sized banks is to consolidate scattered institutions within a region into larger financial entities. Another is for sponsoring banks to acquire village and township-level banks and convert them into subbranches. Analysts believe such measures help integrate regional financial resources and reduce potential risks associated with an overabundance of such institutions.

Data from the National Financial Regulatory Administration show that as of Wednesday, a total of 82 village and township banks, 44 rural commercial banks and 38 county-level rural credit cooperatives had exited the market this year.