Shanxi Rural Commercial Bank Acquires 93.2% Stake in Qingxu Rural Commercial Bank, 22.68% in Liu Lin Rural Commercial Bank

Shanxi Rural Commercial Bank has recently been approved to acquire stakes in two local rural commercial banks, Shanxi Qingxu Rural Commercial Bank and Shanxi Liu Lin Rural Commercial Bank. This strategic move is part of a broader initiative to enhance the bank's regional presence and optimize the governance of local financial institutions.

The approval, issued by the National Financial Supervision and Administration Commission's Shanxi Bureau, allows Shanxi Rural Commercial Bank to hold 100,656 million shares in Qingxu Rural Commercial Bank, representing a 93.2% stake, and 79.4 million shares in Liu Lin Rural Commercial Bank, representing a 22.68% stake. This acquisition follows a previous investment in April, where the bank acquired stakes in Shanxi Lingshi Rural Commercial Bank, Shanxi Wutai Rural Commercial Bank, and Shanxi Yuxi Rural Commercial Bank, with stakes of 1.46%, 1.31%, and 1.46% respectively.

Shanxi Rural Commercial Bank, established in November 2023, is the first in the country to adopt the "top-down" reform model. This model involves the provincial-level agricultural commercial bank investing in and optimizing the governance of local agricultural credit cooperatives. The bank operates as an independent legal entity with a network of 11 municipal-level institutions and 108 county-level institutions. As of March 2024, the bank's total assets amounted to 1,878.173 billion yuan, with total deposits of 1,380.897 billion yuan and total loans of 868.596 billion yuan.

The acquisition of Qingxu Rural Commercial Bank and Liu Lin Rural Commercial Bank is significant not only for its strategic implications but also for its regulatory context. Both banks have a history of association with Chen Hongzhi, a figure known for his involvement in organized crime. Chen was sentenced to death with a two-year reprieve in 2019 for his crimes. Following his conviction, the two banks came under the control of the Shanxi Provincial Finance Bureau until Shanxi Rural Commercial Bank's recent acquisition.

Chen Hongzhi had indirect stakes in both Qingxu Rural Commercial Bank and Liu Lin Rural Commercial Bank through his control over several companies. Qingxu Rural Commercial Bank, which began operations in June 2013, had Chen as a director from its inception. He also held indirect stakes through companies such as Lingfeng Coal Washing and Xinyuan Coal Selection, which held 26.2% and 28% of the bank's shares respectively. Lingfeng Coal Washing was fully owned by Lingzhi Energy, in which Chen held a 95% stake. Xinyuan Coal Selection shared contact information with several other companies linked to Chen, including Lingzhi Coal Chemical and Lingzhi Coal Industry.

The acquisition of these banks by Shanxi Rural Commercial Bank marks a significant step in the bank's expansion strategy, consolidating its position in the regional banking sector. The move also highlights the regulatory efforts to clean up the financial sector by addressing past associations with criminal elements. This strategic acquisition is expected to enhance the bank's operational efficiency and governance standards, aligning with the broader goals of the "top-down" reform model.