Two rural banks in China have reportedly received approval from the China Banking and Insurance Regulatory Commission (CBIRC) to enter bankruptcy procedures.

According to Nikkei Asia’s report, the regulator has ‘in principle agreed’ to the bankruptcy applications made by Liaoyang Rural Commercial Bank and Liaoning Taizehe Village Bank.

In two separate announcements, the regulator asked both the banks to “strictly abide by the relevant laws and regulations in conducting follow-up works.”

The lenders, based in China’s northeastern province of Liaoning, have also been asked to report “if any serious situations occur”.

Based on the joint statements from the local financial regulators in the province, the rural banks were engaged in “operations that violated the laws and regulations,” and they have “gravely destroyed local financial orders, bringing about serious risks.”

As per the publication, the actions against the banks were taken by the local regulators much earlier than the official announcements last week. 

The swift action highlights the caution among authorities following the demonstrations against bank fraud in Henan province. 

The Liaoning regulators have stressed that “the interests of depositors and other creditors are sufficiently guaranteed.”

Meanwhile, the People’s Bank of China (PBOC) is pressurising lenders to offer more loans to aid the country’s economy, Reuters reported citing six bankers. 

Last week, Bloomberg reported that lenders in China are inflating their loan books to meet the government’s demand to boost lending.