Keywords: bank insolvencies, commencement, insolvency requirements, insolvency applicants

Abstract:

This article is the first study investigating the commencement of bank insolvencies after the collapse of Baoshang Bank. It appears that the Chinese Enterprise Bankruptcy Law somewhat fails to resolve bank insolvencies adequately. Regarding the Chinese approach, the normal bankruptcy law de facto serves as part of the regulatory tools in ending the existence of insolvent banks in procedural rather than fulfilling the real insolvency objectives. This article also identifies the two-stage solution for tackling bank insolvencies in China. During the first stage, regulatory authorities take administrative measures to prevent banks from collapsing. The second stage involves distributing assets among creditors and compensating depositors. These processes are both under the supervision of the regulatory authorities. According to statistics, it is very difficult for a troubled bank that already meets the general insolvency standard to enter the formal court-based insolvency procedure. In addition, whether the rescue process is a necessary pre-procedure for every bank insolvency remains controversial due to the inadequacy of laws. Indeed, there are many obstacles to the commencement of the insolvency procedure. This article calls for a more reasonable rule for the commencement of Chinese bank insolvency to promote fairness and efficiency.