SHANGHAI (Reuters) – Chinese regional banks had to pay more for funds through China’s interbank bond market on Monday, and their share prices came under pressure, following a rare takeover of a troubled lender by the country’s banking and insurance regulator.

The China Banking and Insurance Regulatory Commission (CBIRC) will take control of Inner Mongolia-based Baoshang Bank for a year from May 24, as it posed serious credit risks, the regulator and the central bank said on Friday.

Baoshang Bank’s troubles pushed up yields on some negotiable certificates of deposit (NCD) issued by regional banks by more than 10 basis points on Monday, traders said.

An official at the China Foreign Exchange Trading System and National Interbank Funding Center, China’s interbank market trading platform, said it had suspended trading of Baoshang Bank’s bonds following the takeover.

Baoshang Bank has 206 outstanding bonds worth a total of 73.83 billion yuan ($10.71 billion), according to Refinitiv data.

Bank shares also fell, with the CSI China mainland banks index dropping as much as 1.5% before ending the morning down 0.44%.

But Qiu Xiandong, a trader at Bank of Jiaxing, said he saw no signs of panic in the interbank market.

“I don’t see major impact on the market so far,” he said, adding that the government’s takeover of Baoshang bank was handled “quite well”, without causing information distortion that could threaten market stability.

China’s central bank said on Sunday that it would offer “timely and sufficient funds to ensure that (Baoshang Bank’s) payment system is operating smoothly.”

The People’s Bank of China (PBOC) also said that it and the CBIRC would give more policy support to improve small- and mid-sized banks’ corporate governance.

NCDs are short-term interbank debt instruments traded in China’s interbank market, which are used by smaller banks to borrow from larger lenders, and which have in the past attracted regulatory scrutiny as they were used to fund speculative investments.

Reuters reported last year that interbank borrowings at Baoshang Bank, including NCD issuance, accounted for 48 percent of its total liabilities at the end of the third quarter of 2017 – far exceeding a 33-percent cap stipulated by the authorities.

Baoshang’s last filing on its assets and liabilities shows the bank had a total of 156.5 billion yuan of outstanding loans by the end of 2016, a 65% jump from the end of 2014.

It has not published any annual reports since then, citing a plan to seek strategic investors.

While rare, regulatory takeovers aimed at cracking down on systemic financial risks are not unprecedented. The CBIRC took over Anbang Insurance Group in February 2018.

($1 = 6.8927 Chinese yuan)