Small China Banks Steal Billions From 400,000 Depositors

Thousands of depositors at four banks in China's Henan region are protesting to demand a reimbursement of billions of dollars from Chinese regulators after those banks purloined their money, marketed them bizarre financial products, and closed down in April 2022.

Photo Insert: The China Banking and Insurance Regulatory Commission (CBIRC)

Laura He, Nectar Gan, and Wayne Chang of CNN Business reported in April that on June 24, 2022, the four Henan banks froze cash withdrawals. Local banks in China are only allowed to accept deposits from their domestic client base, but they alleged that "third-party platforms" were utilized to gather funds from customers outside the region.

In the case of Peter, a businessman who lost $6 million in three bank accounts, his hometown is over 700 miles away from the banks in Henan.

The national banking authority has accused one of the four banks' biggest shareholders of fraudulently soliciting money from savers. The China Banking and Insurance Regulatory Commission (CBIRC) told state-run Xinhua News Agency in May that "Henan New Fortune Group, a shareholder of the four village banks, has illegally absorbed the public's funds through internal and external collusion, the use of third-party platforms, and fund brokers."

The four banks have not responded to demands for comment: Yuzhou Xinminsheng Village Bank, Shangcai Huimin County Bank, Zhecheng Huanghuai Community Bank, and New Oriental Country Bank of Kaifeng.

There are no official estimates as to how much money bank depositors are unable to withdraw. According to the rules, China insures deposits up to 500,000 yuan ($75,000), but will not pay a single red cent for "illegal deposits" or "illegal investments," causing depositors to lose everything.

According to Sanlian Lifeweek, a state-owned magazine, up to 400,000 depositors in China were unable to retrieve their savings in April. That's a drop in the ocean of China's vast banking system, but about a quarter of the industry's total assets are held by around 4,000 small lenders, which have opaque ownership and governance structures.

The pickets and rallies of the protesting Chinese depositors were put down by authorities after their health codes changed from green to red, making them vulnerable to Covid-19 and necessitating quarantine.

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