What areas have you been focusing on in recent years to effectively prevent and resolve financial risks? The People’s Bank of China published a column on November 13th for a special interpretation.
The column pointed out that the People’s Bank of China, closely focusing on the three tasks of serving the real economy, preventing and controlling financial risks, and deepening financial reform, resolutely fought a tough battle to prevent and resolve major financial risks in accordance with the basic principles of "overall stability, overall coordination, classified policies, and accurate bomb disposal", improved the working system and mechanism of financial stability, and disposed and resolved a number of outstanding risk points with great influence, urgency and overall situation in an orderly manner, effectively safeguarding the overall situation of national economic and financial security and financial stability.
Properly handle high-risk groups and high-risk financial institutions.
The column pointed out that the People’s Bank of China adhered to the principles of marketization and rule of law, filled the shortcomings of the system, and "accurately defused" a group of enterprise groups with high risk and large scale. Through the case warnings of bankruptcy liquidation of Baoshang Bank, bankruptcy reorganization of HNA Group, Huaxin Group and Founder Group, all kinds of business entities are urged to truly feel the hard constraints of market principles such as "doing business requires capital, borrowing money needs to be repaid, investment needs to bear risks, and doing bad things requires a price", thus further strengthening the awareness of practicing according to law, compliance management and prudent operation. We will continue to promote the reform of small and medium-sized banks, accelerate the reform of rural credit cooperatives with "one province and one policy", and steadily promote the reform, restructuring and risk resolution of village banks. Actively explore pilot projects for early correction of hard constraints in some provinces, and put forward a hard constraint requirement of "rectification within a time limit" for incremental high-risk banks.
Comprehensively clean up and rectify the financial order
The column pointed out that the People’s Bank of China formulated a series of regulatory systems, such as the introduction of new asset management regulations, unified regulatory standards, broke rigid payment, strengthened risk isolation, and promoted the rectification and transformation of asset management business. By the end of 2021, the transition period of new asset management regulations ended, and the chaos of nesting and idling funds was effectively curbed, and the scale of shadow banking dropped significantly. Smooth completion of the rectification of outstanding problems in the financial business of Internet platform enterprises, and shift the focus of work to normal supervision. The special rectification of Internet financial risks has achieved good results, all P2P online lending institutions have closed down, and the rectification work in the fields of Internet asset management, equity crowdfunding, Internet insurance, virtual currency trading and Internet foreign exchange trading has been basically completed. We will further promote risk remediation of local financial asset exchanges, "fake gold exchanges" and third-party wealth management companies, crack down on illegal fund-raising and resolutely curb speculation in domestic virtual currency transactions. Continue to intensify the investigation and handling of money laundering cases.
Effectively prevent and resolve risks in key areas.
The column pointed out that the People’s Bank of China made comprehensive measures from both sides of supply and demand to maintain the smooth operation of the real estate market. Keep real estate financing stable and orderly. Due to the city’s policy to implement differentiated housing credit policies, we will continue to guide the real interest rate and down payment ratio to better support rigid and improved housing demand. Take a number of measures with relevant departments to actively support local governments to steadily resolve debt risks. Guide financial institutions to negotiate with financing platforms on an equal footing according to the principles of marketization and rule of law, and adopt classified measures to resolve the risk of existing debts, strictly control incremental debts, and improve the normalized financial debt monitoring mechanism of financing platforms through extension, borrowing new ones and replacing old ones.
Build and improve the financial stability guarantee system
The column pointed out that the People’s Bank of China continued to promote the construction of financial rule of law, and the Financial Stability Law, the People’s Bank of China Law, the Commercial Bank Law and the Insurance Law were included in the legislative plan of the National People’s Congress, while the regulations on local financial supervision and management, non-bank payment institutions and foreign exchange management were included in the legislative work plan of the State Council in 2023. We will improve the framework of macro-prudential management system, establish a countercyclical capital buffer mechanism, introduce evaluation methods for systemically important banks and insurance companies, issue supervision rules and access regulations for financial holding companies, formulate a work plan for overall supervision of financial infrastructure, and constantly improve comprehensive statistics of the financial industry. Improve the deposit insurance system, and effectively play the core functions of deposit insurance, such as preventing bank runs, differential rates, early correction, and risk disposal. Accelerate the establishment of a financial stability guarantee fund, initially establish the basic framework, and have accumulated certain funds.
At present, China’s financial risks are generally convergent and controllable. At the end of the second quarter of 2023, the total assets of China’s financial institutions were 449.21 trillion yuan, of which the total assets of banking institutions were 406.25 trillion yuan, accounting for more than 90% of the assets. The banking industry occupies the dominant position, and the stability of the bank leads to financial stability. Judging from the results of the quarterly rating of banking financial institutions by the People’s Bank of China, most of the nearly 4,000 commercial banks in the second quarter of 2023 are within the safe boundary; The number of high-risk banks is only over 300, and the assets account for less than 2% of all banks. The rating of 24 large banks with assets accounting for about 70% has been excellent, and some banks’ main operating indicators are at the international leading level, which has played a key role in China’s financial system as a "ballast stone". The supervision indicators of financial institutions are in a reasonable range. By the end of the second quarter of 2023, the capital adequacy ratio, non-performing loan ratio and provision coverage ratio of commercial banks were 14.66%, 1.62% and 206.13%, respectively. The average comprehensive solvency adequacy ratio of insurance companies was 188%, and the risk coverage ratio and average capital leverage ratio of securities companies were 255.38% and 18.78%, respectively. The credit risk was at a controllable level and the loss resilience was maintained.
Firmly hold the bottom line of no systemic risk.
The column pointed out that in the next step, the People’s Bank of China will thoroughly implement the spirit of the Central Financial Work Conference and unswervingly follow the road of financial development with China characteristics. Strengthen financial supervision in an all-round way, improve macro-prudential management, strengthen the monitoring and analysis of systemic risks, shadow banking and financial technological innovation, improve the early correction mechanism with hard constraints, and realize early identification, early warning, early exposure and early disposal of risks. Strengthen the construction of financial security system, classify policies, deal with the risks of high-risk small and medium-sized financial institutions in a timely manner, effectively prevent the cross-regional, cross-market and cross-border transmission resonance of risks, and firmly hold the bottom line that systemic risks do not occur.
(CCTV reporter Dong Bin)