China Banking and Insurance Regulatory Commission (CBIRC) approved Baoshang Bank to enter bankruptcy proceedings, according to a statement released on Monday. The bank is set to be the first commercial bank to go bust in China.

The People's Bank of China (PBOC) and the CBIRC took over the Inner Mongolia-based bank last May citing its "serious credit risks."

With capital from deposit insurance funds and the PBOC, principal and interest on personal savings deposits, and those of most institutional creditors, are guaranteed, while large corporate deposits are guaranteed at an average level of 90 percent, the PBOC said in August.

In January, Baoshang Bank's four branches outside Inner Mongolia Autonomous Region were taken over by Huishang Bank, an Anhui-based commercial bank.

Meanwhile, Mengshang Bank, a new commercial bank set up to acquire Baoshang Bank's assets, liabilities, businesses and employees within Inner Mongolia Autonomous Region, began operating on April 30.

The PBOC announced shortly after the takeover that it was a standalone case, triggered by the improper and illegal use of significant bank funds by Tomorrow Holdings, which held 89 percent of Baoshang's shares, leading to a serious credit crisis at the bank.

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