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No panic on the mainland

By Wang Xu and Zhang Qi in Beijing, and Wang Zhenghua in Shanghai (China Daily)
Updated: 2008-09-26 14:54

Mainland depositors seemed to have shrugged off the "malicious rumor" that Bank of East Asia is in trouble, but analysts say the turmoil is a reminder to local lenders that a perceived lack of communication can trigger chaos at a time of financial uncertainties.

"There is no sign of irregular cash withdrawal in our mainland branches," said Sun Minjie, executive vice-president of the bank's mainland subsidiary, at a news conference in Shanghai yesterday. "Still, we have increased temporary liquidity just in case."

Panicked depositors have been waiting outside the bank's branches in Hong Kong since Wednesday after mobile phone text messages claiming the bank was suffering from financial difficulties began to do the rounds.

But mainland lenders seemed unperturbed as bank managers and regulators in Hong Kong responded quickly, scotching the rumor and asserting that the bank is still in good shape.

For half an hour before lunch break, Li Ying, a Hebei native, was the only customer visiting the bank's branch in Beijing's central business district. An employee from the branch said she only received two calls from depositors in the morning concerning the issue.

"There is no panic here, so I think it's all fine," said a customer at the bank's sub-branch in Shanghai's Xintiandi area. The middle-aged man had come for corporate transactions.

The bank's operation on the mainland is stable and has sound fundamentals, the China Banking Regulatory Commission said in a statement posted on its website yesterday.

"The chaos in Hong Kong reflects the weak confidence on financial institutions, which have suffered heavily in the subprime crisis," said Guo Tianyong, a professor with the China University of Finance and Economics. "Now it's extremely important for financial institutions to maintain good communication with the public and avoid unnecessary disturbance."

In the week following Lehman Brothers' bankruptcy filing, six publicly traded mainland lenders disclosed their holdings of bonds issued by the US investment bank. The move was seen as a response to the request by top financial regulators, including the China Banking Regulatory Commission.

The Hong Kong bank said its total outstanding exposures to Lehman Brothers and AIG were only HK$422.8 million and HK$49.9 million respectively. The bank has said none of the wealth management products developed by its mainland subsidiary are linked to Lehman Brothers and won't be affected by its bankruptcy.