Bundles of yuan notes were stacked high behind the counters of branches of Yingkou Coastal Bank earlier this month, as the northeast China lender fought off a run on deposits while on-site government officials battled rumors of a funding crunch.
Yingkou was the latest small bank to have its deposit-reliant funding base undermined by depositors, spooked by the funding crunch that led to the shock state-led rescue of tiny regional lender Baoshang Bank. To help repair the damage, Yingkou hiked its already high deposit interest rates.
The run came just as smaller lenders' reliance on deposits for funding shot up this year after Baoshang's rescue sent interbank interest rates spiking, raising borrowing costs.