Domino #2: Chinese Bank With $105 BN In Assets On Verge Of Collapse https://www.zerohedge.com/…/domino-2-ch ... -105-bn-as… // WeAreTheNewMedia.com
While the western world (and much of the eastern) has been preoccupied with predicting the consequences of Trump's accelerating global trade/tech war, Beijing has had its hands full with avoiding a bank run in the aftermath of Baoshang Bank's failure, scrambling to inject massive amounts of liquidity last week in the form of a 250 billion yuan net open market operation to thaw the interbank market which was on the verge of freezing, and sent overnight funding rates spiking and bond yields and NCD rates higher.
Unfortunately for the PBOC, Beijing is now racing against time to prevent a widespread panic after it opened the Pandora's box when it seized Baoshang Bank two weeks ago, the first official bank failure in a odd replay of what happened with Bear Stearns back in 2008, when JPMorgan was gifted the historic bank for pennies on the dollar.

And with domino #1 down, the question turns to who is next, and will they be China's Lehman.

This was the question we asked last Thursday, when we published a list of regional banks that have delayed publishing 2018 reports, the biggest red flag suggesting an upcoming bank solvency "event."
One day later we may have gotten our answer, when the Bank of Jinzhou, a city commercial bank in Liaoning Province, the second name in the list above, and with some $105 billion in assets, notably bigger than Baoshang, announced that its auditors Ernst & Young Hua Ming LLP and Ernst & Young had resigned, not long after the bank announced it would delay the publication of its annual reports.

For those confused, the delay of an annual report and the resignation of an auditor, means a bank failure is not only virtually certain but practically imminent.

As the bank - which first got in hot water in 2015 over its exposure to the scandal-ridden Hanergy Group - writes in a filing on the Hong Kong Stock Exchange, E&Y was first appointed as the auditors of the Bank at the last annual general meeting of the Bank held on 29 May 2018 to hold office until the conclusion of the next annual general meeting of the Bank. That never happened, because on 31 May 2019, out of the blue, the board and its audit committee received a letter from EY tendering their resignations as the auditors of the Bank with immediate effect.

The reason for the resignation: the bank refused to provide E&Y with documents to confirm the bank's clients were able to service loans, amid indications that the use of proceeds of certain loans granted by the Bank to its institutional customers were not consistent with the purpose stated in their loan documents.

As a result, "after numerous discussions and as at the date of this announcement, no consensus was reached between the Bank and EY on the Outstanding Matters and the proposed timetable for the completion of audit." As a result, after a clear breakdown in relations with its own auditor, the Board decided to appoint Crowe (HK) CPA Limited as the new auditors of the Bank to fill the casual vacancy following the Resignation and to hold the office until the conclusion of the 2018 annual general meeting of the Bank (we are taking the under with lots of leverage as Crowe will likewise quit in the coming weeks if not days).
And confirming that not even the bank's management believes this "justification" will be enough to avoid a rout in the stock, the bank reported that it has requested the trading in the H shares (which was frozen on April 1) on The Stock Exchange of Hong Kong Limited to be suspended until the publication of the 2018 Annual Results. For anyone who hopes that these shares will ever be unfrozen for trading, there are a few bridges in Brooklyn that are for sale.

The real question facing Beijing now is how quickly will Bank of Jinzhou collapse, how will Beijing and the PBOC react, and what whether the other banks on the list above now suffer a raging bank run, on which will certainly not be confined just to China's small and medium banks.

Source: Bloomberg/HKex

FYI

Thank you Arget for this. Do you think it might impact Chinese investments in Cambodia?

Yes, ZeroHedge.com (https://www.zerohedge.com) is the place to be for those who want to keep track of the collapse of civilization in near real-time.

I was just enjoying this article:

"Sea Of Red" For Global Markets As Traders Brace For Recession Amid Global Trade War
https://www.zerohedge.com/news/2019-06- ... -trade-war

Although the quality of the comments has dropped dramatically in the last year or so, they're still worth skimming through as many are informative or funny.

Far be it for me to claim I know anything about anything but I would guess that a lot of the investment in Cambodia is from money laundered from China ( see a couple of blokes caught with suitcases of cash at airport) and dodgy money coming in through illegitimate means.
This equates to no connection to any banking failures that may occur in China as they have already got the money out.
If shit hits the fan then a fair bit of investment will be discontinued as will the fall in investment if the US and EU decide to apply tariffs (US) and rescind the EBA (EU) . HE will put the blame for job losses on the EU and US instead of admitting that he has allowed China to manufacture industries in Cambodia to take use of cheaper exports to both US and EU.
The SEZ may falter for the same reasons as they consist of a lot of PRC companies utilising the cheap tariffs allowed to Cambodia.
That's just my opinion.

Smart people realize you cannot predict when things will happen. A bank can be financially stressed for 10 years and not fail. Or a bank can fail, creating a chain reaction where many other banks also fail.

If China does have a financial crisis, investment in Cambodia will be greatly reduced.

Just in time for Deutsche Bank to take down banking in the West. This time East and West are going down simultaneously. I'm getting my hands on some cash just in case there are runs on banks' cash holdings. I almost never keep cash in hand.
Go to gold when you can.