China closed a record 670 banks—equivalent to about a quarter of the country’s banking entities—as part of a aggressive financial system consolidation. The closures primarily focused on regional and rural commercial banks, which Fitch Ratings identifies as the weakest and most exposed segment of the financial sector. Smaller institutions have suffered from rising non-performing loans (reaching 2.8%) and declining profitability amid sluggish economic momentum and weaker credit demand. Analysts note the coordinated mergers and closures aim to eliminate liquidity risks and bring fragmented regional institutions under stricter regulatory oversight. Fitch Ratings assesses that because these smaller lenders are geographically contained and have low interbank participation, their structural issues are unlikely to trigger a wider systemic crisis.

Full report : Amid slowing economic growth and rising bad loans, Chinese authorities shutter a record 670 smaller and rural lenders.