What thoughts should be aroused when small and medium-sized financial institutions enter the first economic work conference for the first time?Author: Zeng Rong |Research Director of Zhixin Research Company.
Pay attention to the "asset management cloud" and accompany the career growth of financial professionals!
On December 12, this year's first economic work conference closed in Beijing. As usual, a speech of nearly 5,000 words was released, showing the evaluation of the economic operation in the past year and the arrangement of economic work in the coming year.
In general, people will focus on the interpretation of "fiscal policy" and "monetary policy" to predict the impact on the market and the bond market in the coming year. However, there is a sentence in this year's article that needs more attention from financial practitioners, that is, when the meeting emphasized next year's work arrangement, it was mentioned:
It is necessary to coordinate and resolve risks such as real estate, local debt, and small and medium-sized financial institutions.
Real estate risk, local debt risk, how many years have been said, there is nothing surprising, but the words "small and medium-sized financial institution risk" appeared for the first time at the first economic work conference, and "real estate" and "local debt" are listed as the three major risks, which can not but attract attention!
Note that "financial risk" and "financial institution risk" are not the same. Over the years, the first economic work conference has often mentioned the need to "prevent and resolve financial risks" and "focus on preventing and controlling financial risks", which corresponds to "deleveraging", "de-asset bubbles", "responding to credit defaults", or "cracking down on illegal financial activities".
However, "resolving the risks of small and medium-sized financial institutions" means that it is a "person" and a specific company
Which small and medium-sized financial institutions are at risk?
The first thing that may come to mind is "small and medium-sized banks". Because Governor Pan clearly said in the "2023 Financial Street Forum" on November 8 that "a small number of provinces with relatively concentrated high-risk institutions are formulating and implementing a reform plan for small and medium-sized banks to further reduce the number and level of high-risk institutions". Therefore, on November 30, we saw that the Inner Mongolia Supervision Bureau of the Financial Regulatory Bureau issued a document announcing the dissolution of the "Huolin Golmeng Yincun Bank";On December 4, the Beijing Supervision Bureau of the Financial Regulatory Bureau issued a document announcing the dissolution of the "Beijing Daxing Huaxia Village Bank", in addition to the closure of a large number of bank branches and the surrender of the "Financial License".
However, it would be a mistake to think that the risk of small and medium-sized financial institutions is only that of banks. Non-bank institutions should be more vigilant, especially private equity ** and trust companies.
2023 is the "year of strict supervision" for the private equity industry.
On the one hand, the frequent issuance of laws and regulations, such as the Administrative Measures for the Registration and Filing of Private Investment, the Guidelines for the Operation of Private Investment (Draft for Comments), the Regulations on the Supervision and Administration of Private Investment, and the Measures for the Supervision and Administration of Private Investment (Draft for Comments) have been promulgated and solicited opinions one after another, making up for the regulatory gap caused by the "New Regulations on Asset Management" not including private placement over the years, and greatly raising the threshold for the establishment of private placement and the cost of company operation.
As of December 12, 2023, 2,453 private equity ** managers have been cancelled this year (2,217 last year and 1,234 the year before), of which 1,853 were cancelled by the association (843 last year and 593 the year before last). The association has stepped up its efforts to eliminate the chaff, and other disciplinary announcements are even more numerous.
But that's just the beginning.
As of the end of November 2023, there were 21,699 private placement** managers in existence. Among them, there are 8,477 private equity investment managers, 12,952 private equity and venture capital managers, and 9 private asset allocation managersand 261 other private equity managers.
There are many, or too many, among which the good and the bad are uneven, and there are many disadvantages. Therefore, by 2024, when the new regulations are implemented one after another, the private equity industry will accelerate its liquidation, which is not only a problem for private equity itself, but also a problem for other asset management institutions that have invested in private equity.
How can you prevent risk contagion?Prevent public opinion caused by the cancellation and running away of private equity from affecting itselfPrevent the invested assets from causing huge losses or freezing due to private equity business problemsPrevent wealth management customers from taking advantage of this to hold asset management institutions accountable for their failure to perform their duties in investment management or other litigation risks
These are all issues that asset managers should start thinking about now.
Another industry that requires a high degree of vigilance is trusts.
If private placement** has become a regulatory gap because it is not covered by the "New Asset Management Regulations", then the trust industry is still a regulatory gap under the "New Asset Management Regulations" because the business is too complex. In May 2020, the regulator issued the Interim Measures for the Management of Trust Companies (Draft for Comments), but it did not come to fruition. It was not until June 1, 2023, when the Notice on Standardizing the Classification of Trust Business of Trust Companies was officially implemented, that the trust industry had a relatively clear development direction.
But over the years, the risks that have accumulated without strict rectification should be resolved?
Apparently yes!
However, the complexity of the trust industry is still there, and it is deeply bound to real estate risks and local debt risks, which affects the whole body, and any one-size-fits-all regulatory measures are likely to trigger systemic financial risks. Therefore, the regulator has wisely chosen the idea of "checking first, and then solving the problem".
On November 16, 2023, the Financial Regulatory Bureau issued the Interim Measures for the Supervision of Trust Companies and the Supervision of Grading and Classification, announcing that the rating of trust companies will be carried out from January to March 2024, and the results will be announced at the end of April (and every year thereafter). If the company is rated 1-3, it is good and can conduct business normally, and if it is also certified as "with systemic impact", it can be given priority to pilot innovative businesses;However, if it is rated at level 4, it means that there are more or more serious problems in the company's operation, and the regulator will pay close attention to it and take corrective measuresIf it is level 5, it means that the company is likely to be in trouble, and the supervision should be monitored or closely supervised;If it is level 6, the company has already had a credit crisis, or has lost the ability to continue operations, and needs to be upgraded to supervision or administrative receivership. The rated trust company is obviously where the "risk of small and medium-sized financial institutions" lies.
Therefore, trust companies should not pay too much attention to the regulatory rating inspection at the beginning of next year, and even start to check and fill in the gaps by themselves from now on, which will lead to the risk of downgrading in time.
Other asset management institutions that have invested in trusts still consider the same problem:
Once the invested trust company is rated 5-6, how to prevent risk contagion?Prevent public opinion from spreading to oneselfPrevent the investment assets from incurring huge losses or freezing due to the operation of the trust companyPrevent wealth management customers from taking advantage of this to hold asset management institutions accountable for their failure to perform their duties in investment management or other litigation risks
Trust companies are different from private placements, there are only 67, so if any one of them has a problem, the impact will be huge.
In addition to the three obvious problems of banks, private equity ** and trust companies, other financial institutions also have their own hidden dangers. The mandatory fee reduction of the public offering will bring a sharp drop in income, which will bring greater pressure on the survival of small and medium-sized ** companies without characteristics. The "new transaction management regulations" of the public offering ** solicited opinions, and the blow to the securities research institute was almost fatal. As the only institution in the "Seven Heroes of Asset Management" that can provide products that guarantee principal and income, the scale of insurance companies has grown rapidly in recent years, but the principle of guaranteed returns is, in the final analysis, a capital pool. At the moment when the yield of the bond market has fallen to the floor for three consecutive years, will the pool of small and medium-sized insurance companies suddenly collapse?
In addition, the risks of small and medium-sized financial institutions may also lead to liquidity risks, especially the liquidity stratification between banks and non-banks, which should also be the focus of all non-bank asset management institutions next year. The 2019 "Baoshang Incident" is not far away, and the last day of October 2023 will ring the alarm again. If a financial institution has a problem, it is likely that similar institutions will have difficulty in repurchasing in the interbank market, or at the same time be redeemed by customers who do not know the truth. Therefore, even risk-free small and medium-sized financial institutions cannot rest easy.
As financial practitioners, we should realize that a new era has begun, financial institutions are not risk-free, and finance is no longer a golden job, or even an iron job.
But if you hold it carefully, it's still a good job.