Lines outside Bank of China in Sydney after China banking scandal

Lines outside Bank of China in Sydney after China banking scandal

Lengthy lines outside a Sydney bank have come as an eerie warning about what is unfolding in China, where hundreds of thousands of customers have been left unable to withdraw their own money.

Dozens of members of the public have been spotted forming a long line every day outside the Haymarket branch of the Bank of China in the CBD.

The scene attracted attention of curious bystanders Tuesday, one of which shared a photo to Reddit seeking information on what it meant.

People are suspected of rushing to withdraw their funds from the bank after several Chinese banks were accused of defrauding investors.

Among the banks accused of wronging customers were four banks in China’s Henan province which frozen cash withdrawals in mid-April.

The move, which left billions of yuan in savings locked up and sparked sporadic demonstrations, was speculated to be retaliation after regulators scrutinized alleged mismanagement.

While Chinese regulators have promised to repay victims, side effects of the scandal have been felt on an international scale, sparking concern for a global crisis.

It’s understood Bank of China customers have been rushing to withdraw funds in a desperate bid to avoid losing access if it opts to also put a freeze on accounts.

“If you are already at the point where you think the Bank of China could go under and you need to get your money out now your not going to trust any bank. If bank of China goes under would make the 2008 Global Financial Crisis look like nothing,” one Reddit user wrote.

“That said I don’t think the Bank of China is at the point of being in solvency risk, the main problem here is perception. If people think the bank could go under and all try and withdraw it can create a self-fulfilling cycle due to the way modern banks work,” they added.

Someone else pointed out that, “no modern bank can survive having its accounts all called on at once”.

Chinese authorities have named the accused Henan firms and another rural bank in nearby Anhui province as involved in a scheme to defraud investors, and promised victims would start to get their money back.

“Henan New Fortune Group manipulated five village banks in Henan and Anhui to illegally absorb and occupy public funds … and covered up illegal activities,” an unnamed China Banking and Insurance Regulatory Commission representative told state media Sunday, citing a three-month initial police investigation .

“The next stage will be to begin advance payment work for customers with over 50,000 yuan (deposited).”

The Henan banking scandal has dealt an unprecedented blow to public confidence in China’s financial system owing to the size and scale of the fraud, analysts say, with the banks involved allegedly operating illegally for more than a decade, Chinese authorities are desperate to avoid disruptions to social stability just months away from a major congress of the ruling Communist Party.

A July 10 mass demonstration in Henan’s provincial capital Zhengzhou was violently quashed, with demonstrators forced onto buses by police and beaten, according to eyewitness accounts given to AFP and verified photos on social media.

Shortly afterwards, Henan’s provincial banking regulator said customers with deposits of less than 50,000 yuan ($7,500) would be repaid starting Friday.

But in one WeChat group containing hundreds of depositors, only a handful reported successfully receiving their funds back, according to messages seen by AFP.

A few customers reported receiving their deposits Friday, while others complained that the designated mobile app had bugs and would not let them register, according to local media.

The funds being repaid came from some of the seized assets of Henan New Fortune Group, the company accused by police of manipulating the banks, state broadcaster CCTV reported last week.

Regulators have said depositors will be paid in batches, but did not announce a specific time frame for the repayment of accounts with more than 50,000 yuan in funds.

Read related topics:ChinaSydney


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