SHANGHAI (Reuters) - A small bank in eastern China has urged people to ignore rumors and stay rational after a run on one of its branches this week, when about 500 customers sought to withdraw their deposits.


Many analysts see China's smaller banks, including rural lenders, as a potential flashpoint for wider financial instability, because they have less sophisticated methods of risk assessment and regulatory controls.


The Qilu Evening News, owned by a provincial branch of China's ruling Communist Party, said the customers tried to withdraw deposits on Monday from a branch of Linshang Bank in the city of Linyi, in Shandong province.


"In the face of rumors, we hope the public reacts rationally, does not believe in rumors, does not rumor-monger, to avoid harming their own interests," Linshang Bank said on its website in a notice seen by Reuters on Friday.


A person who answered the telephone at the Linyi branch of the bank declined to comment further.


The China Banking Regulatory Commission and the People's Bank of China did not have an immediate comment.

Police questioned 27 people, detained 12 and "severely" reprimanded 15 for rumor-mongering over the bank run, state-run news portal said in a report reposted on the official social media account of the Linyi government on Thursday.

Linyi city police, reached by telephone, declined to comment to Reuters.

Linshang Bank had deposits of 60.9 billion yuan ($9.13 billion) at the end of last year and saw net profit dip slightly to 442.4 million yuan from 443.8 million the year before.

(Reporting by Engen Tham and John Ruwitch in SHANGHAI, Shu Zhang, Dominique Patton and Elias Glenn in BEIJING; Editing by Clarence Fernandez)