China Banking and Insurance Regulatory Commission, Henan office announced their advance payment plan on July 11 to quell public discontent. However, there are still 5 doubts about the incident that have not been revealed.

In the announcement, Henan authorities stated the first payment would start on July 15 for customers of 4 rural banks, including Yuzhou Xinminsheng Rural Bank, Shangcai Huimin Rural Bank, Zhecheng Huanghuai Rural Bank, and Kaifeng New Oriental Rural Bank. The customers will be categorized and the payment will be made in batches. The object of payment is a single entity or person with a combined amount of less than 50,000 yuan (7,400 dollars). If the amount is over 50,000 yuan, the payment will be made successively. The payment arrangement will be later announced separately.

On July 12, Red Star News published an article pointing out 5 questions that need to be clarified urgently about the Henan Rural Bank incident.

First, is the depositor’s money a “deposit” or a “financial product”?

The Public Security Bureau of Xuchang city, Henan province, reported on July 10 that suspects had used a third-party online financial platform and a self-operated platform developed by a criminal group Junzheng Zhida Technology Co. It is also a group of fund brokers to “collect storage and sell financial products.” This is the first official disclosure of how banks absorbed funds.

Whether “financial products” are deposits affects the protection of the rights and interests of depositors.

If the money is a “deposit,” it is protected by China’s Deposit Insurance Regulations. The limit payment is 500,000 yuan (74,000 dollars).

If the payment is characterized as a “financial product,” there is much more uncertainty about the subsequent protection of rights and interests.

As reported on July 11 by International Finance News, depositors of Henan Rural Banks recognized their e-card page of the deposit products purchased through the third-party platform “Du Xiaoman” has been changed to “wealth management products.”

The July 11 announcement stated that the authorities “will not make any advance payments for additional channels to obtain high-interest or suspected illegal and criminal funds.” Is the “additional channels to obtain high-interest” referred to as “financial products?” This requires an official explanation.

Since the Henan Rural Bank accident, depositors have been worried that relevant banks or tripartite platforms will unilaterally change the rigidly accepted bank deposit products into risk-bearing management products. Clearly, “a bank deposit” is the basis for depositors to protect their rights.

Second, what are the responsibilities of third-party Internet financial platforms?

Henan New Fortune Groups uses third-party online financial platforms, such as “Du Xiaoman” or “Xiaomi Finance,” to absorb funds. 

There is no official information about the responsibilities of these platforms.

However, they seemingly play a role in the credit endorsement of rural banks in Henan in acquiring deposits. Otherwise, it is difficult to explain how several village banks in Henan can absorb tens of billions of funds from many parts of the nation in a short period of time.

Third, is it possible to investigate the change in the online trading system?

Since the incident broke out nearly 3 months ago, rural banks still operate and change constantly.

Some depositors found that the online trading system of Kaifeng New Oriental Rural Bank, previously closed, was open for more than 10 minutes on June 26. On July 7, the bank’s app was forced to update the system version. In the new version, there is no channel for withdrawal and transfer.

The next question is related to the red health code. Many depositors’ health codes have turned red twice; how to solve this vulnerability?

On June 22, Zhengzhou authorities notified the investigation into red health code issues. They referred to this as an illegitimate act. However, the Zhengzhou Big Data Administration stated on July 8 that a technical problem occurred while upgrading the health code system the previous night. As a result, some health codes turned abnormal, but all returned to normal after urgent fix.

The final question is that the relevant rural banks have been operating illegally for more than 10 years; how can this be?

On June 18, Xuchang City Public Security Bureau reported that Henan New Fortune Group had been suspected of using rural banks to commit a series of serious crimes since 2011. In other words, violations and even illegal operations of the rural banks have been going on for more than 10 years. Why do these unlawful acts last so long?

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