In the west, the job of government is to prop up wobbly banks. In China, the role of government is seemingly to destabilise lenders. US and European bank bosses, at worst, face losing their jobs. In China, they may lose their liberty too.

The Chinese authorities escalated their attack on Wednesday with a probe into former chair and party chief of state-owned financial conglomerate China Everbright. A one-line statement said Li Xiaopeng is suspected of “serious violations of discipline and law”. 

That familiar line often signals a prolonged investigation. Stock price declines typically ensue.

The same words heralded the removal of Liu Liange of Bank of China last week from his position as chair following a rare investigation into one of China’s “Big Four” state-owned lenders.

The authorities have recently placed more than 20 executives in the financial sector under investigation. Bao Fan, chair of investment bank China Renaissance, is still missing. He is presumed to be in state custody.

Chinese banks were previously safe from state crackdowns. The largest lenders are state-owned and the industry is strictly regulated. This year shares of big banks such as Bank of China, Agricultural Bank of China and China Construction Bank are all up 8 per cent. This is despite rising non-performing loans, which hit a record of Rmb3tn ($436bn) last year.

Lenders were called on to bail out the struggling property sector, offering more than $160bn in fresh credit in November. The Big Four are facing a Rmb3.7tn shortfall on total loss-absorbing capital. Net interest margins shrank last year.

For smaller banks, Beijing’s tone shifted in 2020 when it retreated from its previous implicit guarantee of state-owned companies.

The current purge should rattle investors. Corruption may be a pretext or a genuine motive for ousting out-of-favour bosses. But clear-outs undoubtedly make lenders more obedient politically and less commercial in their motives.