Hundreds of people rushing to withdraw their money from the Yichuan Rural Commercial Bank in Henan province amid rumors via WeChat that the bank was going to bust according to reports from the Chinese media outlet South China Morning Post
The bank didn’t explain the unexpected massive withdrawals, however, confirmed that “services and operation are running normally”.
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The local discipline authority said in an announcement on Wednesday that the bank’s executive, Kang Fengli, is under investigation for discipline violations. In China, discipline violation in this context is usually used for corruption.
However, regulators assured that deposits are covered by the insurance. In 2015 the central bank of China launched an insurance system that covers accounts of up to 500,000 Yuan, the equivalent of $70,000.
The announcement came a day after the authorities in the Yichuan province affirmed on Tuesday that the bank had seen an overwhelming increase of demand for cash withdrawals which caused slow operations over the counter.
The sudden demand for cash withdrawals came during a period of bad indicators of China’s local banks after the government took over 3 banks only in the last 6 months, in particular, the Bank of Jinzhou in Liaoning, Baoshang Bank in Mongolia, and Hengfeng Bank in Shandong.
The banking sector is threatened to shrink by 1/3 in the next month according to the McKinsey Report
Rush in withdrawal demand is a usual thing that happens when trust in financial institutions is lost.
In many countries where economies have failed banks usually close the doors and empty ATMs leaving their customers without access to their accounts. Lebanon is a fresh example of this situation where people can not access their money for almost 3 weeks since the beginning of the protests.
In the same countries, there is a growing interest in bitcoin as an alternative to the failing monetary system. With bitcoin, you have access to your account 24 hours a day 7 days a week and nobody can restrict you from accessing your account.