Recently, the People's Bank of China released the China Financial Stability Report (2023) (hereinafter referred to as the "Report"), which comprehensively assesses the soundness of China's financial system in 2022.
The report pointed out that the financial system conscientiously implements the best decision-making and deployment, and in accordance with the requirements of "epidemic prevention, economic stability, and development security", takes the initiative to act and make efforts to move forward, resolutely supports the stabilization of the economy, effectively prevents and controls financial risks, continues to deepen financial reform and opening up, and effectively improves financial services.
First, we will go all out to support the stabilization of the macro economy. The second is to promote risk disposal in a steady and orderly manner. Third, we will continue to clean up and rectify the financial order. Fourth, we will make every effort to maintain the steady operation of the real estate market. Fifth, effectively respond to the risk of external shocks. Sixth, positive progress has been made in the construction of the financial stability guarantee system.
On the whole, the financial stability work has achieved positive results in precise bomb disposal, reform and risk reduction, grasping the front-end treatment of diseases, and building mechanisms to make up for shortcomings, and the financial risks have been generally converged and controllable, and the financial system has withstood the impact of a complex environment.
In addition, the report also provides a detailed interpretation of topics such as financial stability legislation and the operation of banking financial institutions. The Financial Times reporter made a key combing.
Actively promote financial stability legislation
Financial stability is an important guarantee for the healthy and orderly development of the national economy and long-term peace and stability, and preventing the occurrence of systemic financial risks is the eternal theme of financial work. In December 2022, the 38th meeting of the Standing Committee of the 13th National People's Congress (NPC) conducted its first deliberation on the draft Financial Stability Law and solicited public comments. The Standing Committee of the 14th National People's Congress (NPC) has included the Financial Stability Law in its legislative plan and 2023 legislative work plan. According to the report, in the next step, the People's Bank of China will conscientiously implement the requirements of the "Party and State Institutional Reform Plan" and the spirit of the Financial Work Conference, cooperate with the continuous promotion of the legislative process, and promote the early introduction and implementation of the Financial Stability Law. At the same time, we should step up the revision of the People's Bank of China Law, the Commercial Bank Law, the Insurance Law and other relevant laws, and the Financial Stability Law have their own focus and complement each other, jointly form an organic whole, and give full play to the role of the rule of law in consolidating the fundamentals, stabilizing expectations, and benefiting the long-term. 
The overall operation of China's banking financial institutions is stable
In the second quarter of 2023, the People's Bank of China rated 4,364 banking financial institutions, including 3,992 banking institutions and 372 non-bank institutions. Judging from the rating results, the overall operation of China's banking financial institutions is stable and the risks are generally controllable. The 3,992 participating banks include 24 major banks and 3,968 small and medium-sized banks. The rating results are classified from low to high risk on a scale of 1-10 and D, with D indicating that the institution has gone out of business, taken over or withdrawn. Among them, the rating results are 1-5 for "green zone" and 7 for "yellow zone", and "green zone" and "yellow zone" institutions can be considered to be within the security boundary;The rating result is 8-D in the "red zone", indicating that the institution is in a high-risk state. The rating results show that there are 3,655 banks in grades 1-7, and their assets account for 98 percent of the total assets of all participating banks28%。In terms of the types of institutions, the rating results of large banks are relatively good, and some small and medium-sized financial institutions in rural areas have certain risks. Among the 24 large banks, 1 is rated at level 1, 13 are rated at level 2, 6 are rated at level 3, 2 are rated at level 4, 1 is rated at level 5, and 1 is rated at level 7, accounting for 73 of all participating banks in terms of assets8% is the ballast stone for the stability of the financial system. Among the small and medium-sized banks, foreign banks, private banks and direct banks have better rating results, with % of institutions distributed in the "green zone" and no high-risk banksCity commercial banks were rated second with 672% of banks are located in the "green zone", but there are also 115% of institutions are high-risk banks;The number of high-risk banks in rural cooperative institutions (including rural commercial banks, rural cooperative banks, and rural credit cooperatives) and village and township banks was 191 and 132 respectively, and the asset scale accounted for 084%。In terms of sub-regions, the stock risk of most provinces has been reduced, and the regional financial ecology has been continuously optimized. Fujian, Guizhou, Jiangsu, Jiangxi, Qinghai, Shandong, Chongqing, Shanghai, Zhejiang 10 provinces, autonomous regions and municipalities have no high-risk banks, and another 13 provinces, autonomous regions and municipalities have maintained high-risk banks at single-digit levels.
"One province, one policy" to speed up the reform of rural credit cooperatives
Since 2022, the reform of rural credit cooperatives has accelerated significantly. Zhejiang, Liaoning, Shanxi, Henan, Guangxi, Hainan and other provinces and regions of rural credit cooperatives reform risk reduction plan has been approved. Zhejiang Rural Commercial United Bank, Liaoning Rural Commercial Bank, and Henan Rural Commercial United Bank have been established, Shanxi Rural Commercial United Bank has been approved for establishment, and Guangxi and Hainan are also speeding up the establishment of provincial-level institutions. Other provinces and autonomous regions are strengthening communication with relevant departments to improve the reform and risk reduction plan of rural credit cooperatives. The report said that in the next step, the financial management department will resolutely implement the decision-making and deployment, strengthen communication and cooperation with local party committees, adhere to the combination of problem-oriented and goal-oriented, accelerate the reform of rural credit cooperatives with "one province and one policy", promote deepening reform and risk resolution in an integrated manner, solve the institutional and institutional difficulties restricting the steady development of rural credit cooperatives, promote the high-quality development of rural credit cooperatives, and provide strong financial support for rural revitalization.
Maintain the soundness of monetary policy
The report pointed out that at present, the world economy is generally unstable and uncertain, the tightening effect of monetary policy in major developed economies is prominent, and the volatility of international financial markets is intensifying. China's economic operation continues to improve, positive factors continue to accumulate, and economic development opportunities and challenges coexist. The banking industry should continue to improve the quality and efficiency of serving the real economy, strengthen the construction of the governance system, prudently resolve risks in key areas, and firmly adhere to the bottom line of preventing systemic financial risks. The first is to maintain the soundness of monetary policy and increase support for the real economy. Comprehensively use a variety of monetary policy tools to maintain reasonable and abundant liquidity, and keep the growth rate of monetary and social financing basically matching the growth rate of the nominal economy. We should grasp the pace and intensity of credit delivery, meet the effective loan needs of the real economy in accordance with the principles of marketization and rule of law, enhance the stability and sustainability of total credit growth, and increase support for key areas such as inclusive finance, scientific and technological innovation, and green development. Give full play to the efficiency of interest rate reform in the loan market, and take multiple measures to reduce the financing cost of business entities. The second is to prevent and resolve risks in key areas. We will continue to further promote the reform of small and medium-sized banks and reduce risks, actively and steadily promote the risk resolution of urban commercial banks and rural credit cooperatives, and steadily promote the reform and reorganization of village and township banks. Encourage multiple channels to replenish the capital of small and medium-sized banks. Strengthen the risk monitoring of banking institutions, supervise the classification of non-performing assets, and increase the disposal of non-performing assets. Maintain stable and orderly real estate financing, meet the demand for rigid and improved housing, support the delivery of buildings, stabilize people's livelihood, and implement differentiated credit policies "according to the city". Actively cooperate with the resolution of local ** debt risks, optimize the debt maturity structure, reduce the interest burden, resolutely curb the increment, and resolve the stock. The third is to strengthen the construction of the banking governance system and the financial stability guarantee mechanism, and consolidate the foundation for steady development. Effectively make up for the shortcomings of supervision, strengthen the source control of financial risks, promote the deep integration of party leadership and corporate governance in banking institutions, strengthen the management of key people, key positions and key links, effectively improve the level of risk control, and strengthen financial anti-corruption and discipline accountability. We will continue to strengthen the monitoring and early warning of bank risks, and promote the implementation of an early correction mechanism with hard constraints. Strengthen the monitoring and assessment of the situation of the international financial market, pay close attention to the evolution of risk events of overseas banks, and earnestly prepare risk response plans to prevent international financial risk events from affecting the sound operation of China's banking industry. Everybody is watching
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