HONG KONG: The Chinese government’s first seizure of a bank in more than two decades piles fresh pressure on shares of small lenders that already trade at rock-bottom valuations.

A Bloomberg index of Hong Kong-listed Chinese banks fell to a four-month low on Monday after regulators assumed control of Baoshang Bank Co citing “serious” credit risks. With the interbank repurchase rate jumping to the highest in a month and loss-absorbing bonds, known at AT1s, slumping across several small lenders yesterday, policymakers injected more cash into the banking system.