China Shutters Nearly 25% of Its Banks Amid Oversight Push

China has reportedly closed almost 25% of its banks amid increased oversight of smaller lenders.

The world’s second largest economy shuttered a record 670-plus banks in 2025, the Financial Times (FT) reported Saturday (Oct. 3), citing figures from China’s National Financial Regulatory Administration.

The closures, primarily in rural areas, place the number of banking entities in China at 3,139, a 23% decrease in the four years leading to 2025. FT added that low rates and deflation in China have strained bank profits in the face of an ongoing property slowdown.

Banking consolidation was about “regulatory simplification” and “eliminating the potential for liquidity events among small institutions,” Jason Bedford, a senior visiting research fellow at the East Asian Institute, National University of Singapore, told FT.

“We’ve never seen consolidations on this scale before,” he said.

FT also cited a report from the Fitch rating system that said small banks in China, primarily in cities and rural areas, “remain the weakest part of the system, with poor asset quality, low capitalization and governance shortcomings, especially in less-developed regions.”

The report added that rural and regional city-level banks, often defined by the level of administrative government covering them, make up more than a quarter of China’s banking assets. Although rural lenders account for nearly all the recent bank closings, city-level banks have also fallen under increased scrutiny.

In other banking news, PYMNTS wrote last week about a push by Wall Street banks to accelerate their artificial intelligence hiring as they pivot from chatbots to AI agents. Hiring is going beyond model builders to engineers who design agents for work across trading desks, compliance units and back-office operations.

AI-related job postings at banks such as JPMorgan Chase, Citigroup and Capital One rose 49% this year to 139,819, according to a CNBC report that cited data from Draup, an enterprise hiring analytics firm that builds its counts from public job posts and platforms like LinkedIn.

“The hiring push follows a regulatory gap,” the report added. “Revised model risk guidance issued April 17 by the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. superseded a framework in place since 2011. It left generative and agentic AI outside its scope.”

The agencies described these technologies as “novel and rapidly evolving,” letting banks use their own risk management and governance practices.