According to the Epoch Times, Chinese media reports said that about 1 million bank customers in China could not withdraw their money for more than a month.
The incident involved four local banks in Henan Province.
Bloomberg reported that an investigation from the China Banking and Insurance Regulatory Commission (CBIRC) found that a private investment firm, Henan Xincaifu Group Investment Holding Co. colluded with bank employees to engage in illegal wealth collecting activities using online platforms. The firm is a major shareholder in all four banks.
Reuters reports mentioned the sum withheld was about 178 million dollars, but one insider told Bloomberg that at least 1.5 billion dollars in funds were involved. Chinese regulators said that the investigation is still ongoing, and it does not yet know if the money is missing.
The Epoch Times reported that local governments initially said internal systems were being upgraded to prevent illegal activities. The Chinese Central Bank also issued a statement of investigation.
The CBIRC said it was concerned about the incident and pledged to punish any financial crimes.
It also warned customers of financial scams such as high-interest and high-yield investments.
Meanwhile, hundreds of protesters gathered in front of the CBIRC local office on Monday in the largest city in Henan province this week.
The protesters carried signs, “Return my savings,” and asked authorities to investigate the scam.
It is reported that police assaulted protesters and arrested some of them.
SCMP reported that small banks played an important role during the pandemic because they provided funds to small factories and farmers.
In the last decade, small banks in China enjoyed rapid growth due to the state-led growth model. Unfortunately, this has led to debt-fuelled spending by local authorities. But, many of them are now facing problems, including high bad debts, insufficient funds, and poor governance.