Village banks across China are undergoing a significant contraction in their legal entity count. In this latest round of consolidation, even the largest village bank group has begun dissolving its subsidiary institutions.

On September 3, the Shanghai Financial Regulatory Bureau approved the dissolution of Shanghai Pudong Sino-BOC ABT Village Bank, with Bank of China Shanghai Branch taking over all of its business operations. Within the same month, the number of village bank legal entities nationwide dropped below 1,000 for the first time.

According to data from the National Financial Regulatory Administration's financial license information system, another 10 village banks exited between September 8 and 11, reducing the total from 1,010 to 1,000. At the end of 2021, that figure stood at 1,651, meaning the count has shrunk by approximately 40% in five years.

Pudong Sino-BOC ABT Village Bank Gets Dissolution Approval, with Bank of China Shanghai Branch Absorbing All Business

The predecessor of Pudong Sino-BOC ABT Village Bank was Pudong Jianxin Village Bank, established by China Construction Bank in 2010. In 2018, it was merged into the Sino-BOC ABT system along with 27 other Jianxin-affiliated village banks. Sino-BOC ABT is the largest village bank group in China, established as a joint venture between Bank of China and Temasek's Fullerton Financial Holdings, and currently controls 134 village banks.

The exit of Pudong Sino-BOC ABT Village Bank followed a three-step process: the lead initiating bank first acquired full ownership, then obtained dissolution approval, and finally returned its financial license. On July 30, the Shanghai Financial Regulatory Bureau approved Sino-BOC ABT's acquisition of a 40% stake held by five shareholders, including Shanghai Urban Investment Asset Management, raising its holdings to 100%.

On August 27, the bank issued a business migration notice stating that all operations would be transferred to Bank of China Shanghai Branch. On September 3, the dissolution approval was issued, requiring the bank to immediately cease operations and return its financial license within 15 working days. The migration proceeded in stages: mobile banking, online banking, and branch services were phased out, original bank card payment functions were disabled, and from September 7 onward, customers were directed to the Taierzhuang Road sub-branch of Bank of China Shanghai Branch for account migration and card replacement.

This marks the first village bank legal entity under the Sino-BOC ABT umbrella to complete the full dissolution process.

From 8 to 310 Exits, Deregistration Becomes Routine Practice

While Pudong Sino-BOC ABT may appear to be an isolated case, the broader national trend shows a clear acceleration in village bank exits after 2024. There were 8 exits in 2022, 9 in 2023, 83 in 2024, and 310 in 2025.

The regulatory framework for these exits dates back to late December 2020, when the former China Banking and Insurance Regulatory Commission issued a notice on further promoting risk resolution and reform restructuring of village banks. This document explicitly allowed lead initiating banks to convert high-risk village banks into branch institutions, creating the regulatory pathway for what is known as "village-to-branch" conversions.

The real acceleration came after 2022. That year, risk exposures at certain individual village banks prompted regulators to designate reform and risk resolution of small and medium financial institutions as an annual priority. The 2025 Central Document No. 1 called for "steadily and orderly promoting the reform and restructuring of village banks," and the Central Economic Work Conference at the end of 2025 emphasized "deepening the reduction in quantity and improvement in quality of small and medium financial institutions."

The 310 exits in 2025 alone accounted for over 70% of the cumulative total since 2022. Combined with the 106 exits in the first half of 2026, this wave of deregistration has shifted from case-by-case handling to annual routine operations.

Bank of Communications Hits Zero, SPD Bank Converts Branches, Three Paths Advance in Parallel

Based on disclosed cases, village bank exits are being completed through three primary methods. The first is "village-to-branch," where the lead initiating bank merges its affiliated village banks, cancels their legal entity status, and converts them into its own branch institutions. This approach has a short operational chain and is currently the mainstream method. Six village banks under Agricultural Bank of China completed this process in early 2026, while Bank of Communications converted its four village banks into directly managed sub-branches in March 2026, bringing its count to zero. China Everbright Bank also cleared its three remaining village banks through exits, and China EverBright Bank has likewise completed the clearance of its village bank subsidiaries.

Shanghai Pudong Development Bank (SPD Bank) had already acquired and converted 12 of its village banks into branch institutions by 2025, with the remaining 16 currently in progress. The second path is "village-merging-village," where an existing village bank under the same lead initiating bank absorbs and merges sister institutions while retaining independent legal entity status. In September 2026, Zhuozhou Zhongcheng Village Bank, under Chengdu Rural Commercial Bank, absorbed five other Zhongcheng-affiliated banks from Dingzhou, Quyang, Wangdu, Anguo, and Gaobeidian, completing a six-into-one consolidation.

The third path involves business transfer followed by dissolution, primarily seen with foreign banks. HSBC Holdings PLC established 12 wholly-owned village banks in mainland China starting in 2007, and six have already announced dissolution, transfer, or cessation of operations, with deposits and loans being assumed by relevant HSBC China branches. HSBC's situation is unique because its village banks are 100% owned by Hong Kong and Shanghai Banking Corporation, leaving no same-tier legal entity within its system to absorb them. Additionally, HSBC China's branches are foreign bank branches and are not qualified to hold equity in legal entities or convert them into sub-branches.

Branch conversion typically preserves county-level network touchpoints, mergers are intended to maintain stand-alone operations, and dissolution means directly consolidating overlapping same-city institutions.

134 Entities, RMB 100 Billion in Assets, RMB 200 Million in Profit – Group Direction Shifts from Expansion to Reduction

As of the end of 2025, Sino-BOC ABT operated 134 village banks and 185 sub-branches across 22 provinces, municipalities, and autonomous regions. According to industry statistics, it is followed by the Changjiang system with 47 institutions, the Fumin system with 44, the Zhongcheng system with 39, the Shanghai Rural Commercial Bank system with 35, and the Huimin system with 33.

A larger number of institutions does not necessarily translate into stronger profitability. Sino-BOC ABT reported total assets of RMB 104.455 billion and net profit of RMB 212 million for 2025, with a non-performing loan ratio of 1.78%. Spread across 134 legal entities, the average assets per institution stand at approximately RMB 780 million, yielding a return on assets of roughly 0.2%.

Each independently licensed entity must bear rigid management costs for systems, risk control, compliance, and other overheads, and the scale of individual institutions is often insufficient to spread these expenses. This is precisely the constraint facing the group model today. Over the past decade-plus, lead initiating banks rapidly expanded county-level networks by establishing village banks in batches; now that individual institutions find it difficult to cover the fixed costs of independent licensing with their earnings, the direction has shifted from adding legal entities to reducing them.

Six of HSBC's 12 institutions have exited, 12 of SPD Bank's 28 have completed conversion, Bank of Communications and China Everbright Bank have both reached zero, and Chengdu Rural Commercial Bank has merged five institutions. The remaining village banks are primarily those initiated by city commercial banks and rural commercial banks in county areas. Whether these institutions will maintain their stand-alone status or follow the reduction trend will depend on subsequent regulatory approvals and the disclosure pace of each bank.