China has taken multiple regulatory steps in a joint effort
to tackle insolvency issues plaguing its banking sector, but a
bankruptcy regime is needed.
The China Banking Regulatory Commission (CBRC) issued a
notice last July announcing the regulator’s
legislation plan for dealing with PRC commercial
banks’ bankruptcy risks. This came more than a
year after the State Council issued the deposit insurance rules
for the first time, aimed at providing legal recourse to
depositors seeking compensation from a failed bank.
But counsel in Greater China argue that, without a formal
bankruptcy regime, there are limited and sometimes ineffective
methods that the government could use to address bankruptcy
"Before any legislation is formally promulgated, there are
limited numbers of methods to help troubled banks other than
capital injections or merging them with healthier ones," said
Rose Zhu, partner at Baker McKenzie....