LIAONING Province plans to start merging local banks into one provincial lender as early as next month, Reuters quoted sources with direct knowledge of the matter as saying Saturday, as the province speeds up moves to curb risks in its capital-strapped banking system.

The new lender, to be known as Bank of Liaoshen, will absorb Bank of Liaoyang and Yingkou Coastal Bank in the first phase of a longer-term merger, the sources said.

The Bank of Liaoshen will have an initial registered capital of 20 billion yuan (US$3.10 billion), the report said.

Some smaller banks in Liaoning have been hit by a rush of deposit withdrawals since late 2019, including Yingkou Coastal and Bank of Huludao, fueled by depositor speculation over funding crunches and poor corporate governance.

The new bank is expected to launch in late June or early July, depending on the progress made in disposing the soured debts of Bank of Liaoyang and Yingkou Coastal Bank, the sources said.

The Liaoning government said it would set up a new provincial-level bank by merging 12 local banks, according to a government statement on the website of the People’s Bank of China (PBOC) in January.

The 12 banks were not named.

The Liaoning government said last week it will issue 10 billion yuan of special government bonds to support a new commercial bank, without identifying the lender.

One of the sources said the remaining 10 billion yuan of capital will be drawn from investment arms of local governments and local State-owned companies.

In recent years, in an attempt to defuse regional banking risks, China’s top banking regulator has been encouraging smaller banks to boost their capital base, which has prompted mergers and acquisitions in the sector.

In a similar move, Sichuan Province unveiled plans last June to merge Liangshanzhou Commercial Bank and Panzhihua Municipal Commercial Bank into a single commercial lender.(SD-Agencies)