The People's Bank of China (PBOC) will also write off some unpaid debts of the bank by law and would hold accountable relevant personnel in future, it said in its second-quarter monetary policy report.
Chinese financial regulators took control of Baoshang in May last year citing serious credit risks, and have since approved Mengshang Bank, a newly revamped bank based in Inner Mongolia, and Hong Kong-listed Huishang Bank to take over its assets and operations.
The latest move regarding Baoshang follows the PBOC's inspection of the lender's assets and liabilities, it said, and the result showed it was deep in insolvency when it was taken over.
"Without the intervention of public funds, the average repayment rate of creditors would be less than 60% in theory," the central bank said in the report, adding that 90% of big creditors' debts have been repaid through the PBOC's actions.
Baoshang was once 89% controlled by conglomerate Tomorrow Holdings. The central bank said the systemic risks posed by the group involved excessive borrowing and misuse of funds from the financial firms it owned.
Chinese regulators on July 17 seized control of a group of nine financial institutions with connections to Tomorrow, in a further crackdown by authorities seeking to stem systemic financial risks in a slowing economy.
(Reporting by Cheng Leng and Ryan Woo; Editing by David Holmes)