MNI Policy: PBOC Assures Liquidity after Seizing Small Lender

     BEIJING (MNI) - The People's Bank of China (PBOC), China's central bank,

said on Sunday it will use open market operations and other tools to ensure

"reasonable and ample liquidity" to deal with any potential impact after taking

over a failing small domestic lender.

     Authorities seized the Inner Mongolia-based Baoshang Bank after learning it

posed serious credit risks, and the China Construction Bank (CCB) is entrusted

to manage its business operations, the central bank said.

     The takeover by the top regulators ensures that the Baoshang Bank maintains

a national-level credit standing, the PBOC said.

     Personal savings as well as corporate deposits and interbank liabilities

below CNY50 million held by Baoshang Bank will be covered by the PBOC, the China

Banking and Insurance Regulatory Commission and the Deposit Insurance Fund, PBOC

said. Corporate deposits and interbank abilities exceeding CNY50 million will be

negotiated by the authorities and creditors, it said.

     The PBOC will strengthen the monitoring of the liquidity condition of other

small and medium-sized banks and ensure money market rates are stable, according

to the central bank.

     The PBOC will firmly prevent systemic risks and protect the legal rights of

depositors, as well as to minimize the cost of disposing credit risks, it said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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