DEFUSING THE BOMB

In the past year, China has reined in exposed financial risks regarding small and medium-sized banks and prevented them from spilling over.

No bank runs occurred after the May takeover of Baoshang Bank by the PBOC and the China Banking and Insurance Regulatory Commission (CBIRC), and debt repayment and transfers have been completed for big institutional and interbank clients of the lender.

The PBOC conducted open market operations and used medium-term lending facilities to restore liquidity among small and medium-sized banks affected by the incident.

"Commercial banks, including small and medium-sized ones, have maintained profit growth with their risk level basically under control," said Lu Zhengwei, chief economist at Industrial Bank.

Official data showed more than 99.2 percent of small and medium-sized banks passing the required liquidity threshold by the end of the third quarter.

The PBOC said it will continue to closely watch the liquidity levels of small and medium-sized banks and offer more policy support for their sustainable development.

The CBIRC will replenish capital for smaller banks and urge them to dispose of non-performing loans, said Yang Liping, an official with the commission.