China Detains Suspect for Spreading Rumor Leading to Bank Run

Mar 27, 2014 3:20 am ET

March 27 (Bloomberg) -- Chinese police detained a person suspected of spreading rumors that triggered several bank runs in eastern Jiangsu province and urged the public not to believe or disseminate the speculation.

A person surnamed Cai was taken into custody on March 26, according to a statement on the Yancheng city police’s official microblog. The investigation is ongoing, the police said. Yancheng is in Jiangsu province’s north.

Thousands of depositors rushed to outlets of Jiangsu Sheyang Rural Commercial Bank on March 24 amid rumors the lender had gone bankrupt. Even as officials from the lender, government and regulator dismissed the talk and assured customers of the safety of their deposits, a panic among local people led to runs at other banks’ branches in Yancheng.

Operations of China’s rural commercial banks are “sound” with adequate capital and liquidity levels, and there is no bankruptcy risk for Sheyang Bank, the China Banking Association said in a statement yesterday. It told rural banks to increase cash reserves and extend office hours to meet withdrawal requests from depositors at all times.