A massive bank now files for unexpected bankruptcy after declaring a shortfall of as much as $36.4 billion in November.
The Chinese shadow bank Zhongzhi told its investors it was “severely insolvent”.
Its wealth management arm came under police investigations days later, reports BankingDive.
The bank made a statement Friday from Beijing’s First Intermediate People’s Court, which accepted its application for liquidation.
Zhongzhi said it “obviously” lacked the ability to repay its debts, according to the statement, seen by Bloomberg.
In November, the bank declared a shortfall of as much as $36.4 billion and told investors, in an open letter, that it was “severely insolvent,” adding that management had “run wild” after the 2021 death of the firm’s founder, Xie Zhikun, per FT.
Zhongzhi’s collapse exposes potential flaws in China’s $2.9 trillion trust sector, a loosely regulated gray area of the financial system that offers investment products to wealthy individuals and businesses.
The sector is a crucial source of alternative for its borrowers, which include real estate developers and local governments, reports BankingDive.
The Chinese government, in recent years, has ramped up pressure to reduce trust funds’ exposure to real estate.
Chinese trust companies’ exposure to property in the second quarter of 2023 sank to 6.7%, from 15% in 2019, the Financial Times reported, citing research from Natixis.
Zhaopeng Xing, a senior China strategist at ANZ, told The Wall Street Journal the risk of contagion from Zhongzhi has passed, adding that accountants have spent months going through the company’s books and quantifying its risks.
But Xiaoxi Zhang, an analyst at Gavekal Dragonomics, said knock-on impact is still a possibility.
“Domestic investor sentiment may turn even worse, especially for wealthy investors,” she told The Wall Street Journal.
“And of course, other shadow bank institutions are likely to follow suit.”
Also Read: A US Bank is Now Denying Customers Access to Money
Other Banking News Today
A massive US bank is now being accused of freezing accounts according to several customer reports on social media forums.
JPMorgan Chase is facing fresh accusations of locking down and terminating a customer’s bank account over unfounded concerns of suspicious activity, reports DailyHodl.
In a new post on the r/Chase Reddit forum, a user says a new Chase bank account has been abruptly shut down without warning or explanation.
After getting their account set up, the poster says their mother sent cash to the new account via Zelle, and several additional Zelle transactions were sent and received with friends and family for basic items like Uber rides and food.
Three days after the account was opened, the Reddit user says they were completely locked out of their account.
“When I try to login it says my account is locked due to suspicious activity. I cannot call at this time because it is already past business hours so I wait until Friday morning. I call and they are not able to confirm my identity over the phone because the number I gave wouldn’t show up in their database (this is the number I used to open the account).
At this point, the user says they were not informed that the account was facing imminent termination.
I’m told that I would need to go in person with two forms of ID. I schedule a meeting for whenever I wasn’t busy which was Thursday the 21st. The day comes, but I am unable to make it so I rescheduled for the 26th (today) which was the only day available. Today comes and I find out that my account was closed.
I only had 10 business days to resolve this, which I did not know because in the mail I received it didn’t specify how long I had. I’d also like to add that on the 15th when I was locked out of my account it said my balance reached below $20 and my available balance was $0. I had $50 when I was locked out.”
This isn’t the first time JPMorgan Chase has been accused of wrongfully closing accounts.
Last summer, Republican attorneys general in 19 states accused JPMorgan of routinely discriminating against its own clients and closing bank accounts without warning based on religious and political biases.
Also Read: The US Treasury Direct is Now Freezing Customer Accounts
Market News Published Daily 📰
Don’t forget to opt-in for push notifications so you don’t miss a single article!
Also, thank you to all of our blog sponsors.
This year we’ve been able to increase push notifications slots making it more convenient than ever for new readers to receive their daily market news and updates.
Scroll below to view my stock purchases this month!
You can also follow me on X (Twitter), Instagram, Facebook, or LinkedIn for daily news and updates on your favorite stories.
Frank Nez’s Stock Portfolio
Wondering which stocks Frank Nez is holding? Which stocks is Frank Nez buying?
Frank Nez is now sharing his exclusive and personal stock portfolio with readers, only on the Patreon.
11/16/2023 – Today I invested $1,000 in two different stocks for a brand new stock dividend portfolio I am creating for 2024.
Recommended For You ✨
About The Author
Leave your thoughts below.
For more news and updates like this, opt-in for push notifications.
You can also follow me on social media.
X: https://twitter.com/FNez_Blogger
IG: https://www.instagram.com/iamfranknez/