In recent years, with the continuous opening up of China's financial industry, many village and township banks have emerged in various places. However, due to fierce competition in the industry and high interest rates, small and medium-sized banks frequently face the risk of bankruptcy and bankruptcy. According to ** reports, in December this year alone, two village and township banks announced their dissolution, bringing the number of bankrupt and collapsed village and township banks this year to 10. The phenomenon has raised public concerns about the safety of bank deposits, especially among those with depositors of more than 500,000 yuan.
However, in the face of the bankruptcy of small and medium-sized banks, where will the people's money go?How to ensure the safety of deposits?In this article, the author will provide you with some suggestions and reflections on the deposit insurance system, the selection of banks, and the diversification of deposits.
1. Fierce competition in the same industry
As we all know, with the opening up of the financial industry, various types of banks have emerged. In order to survive in a highly competitive market, small and medium-sized banks have to resort to various means to attract customers. However, this competition has also made the operating environment for banks extremely difficult. Banks such as Gaocheng Hengsheng Rural Bank and Jinju Hengsheng Rural Bank were unable to withstand the pressure of competition, and their poor management eventually led to bankruptcy and collapse.
Expanding: The same thing happened to other small and medium-sized banks. After all, a bank can only continue to grow if it remains dynamic and generates profits in the face of market competition. However, in today's financial industry, the competition has become fierce to the extreme. Banks not only have to face competition from their peers, but also have to deal with the impact of new financial institutions such as Internet finance. In order to retain customers and attract new customers, banks have to launch various promotions and high-yield wealth management products. However, this competition often comes at the cost of reduced profit margins and increased capital risk, and when not doing well, banks are threatened with bankruptcy.
2. High-risk investment
In order to attract more depositors' deposits, small and medium-sized banks often adopt the method of collecting deposits at high interest rates. However, high interest rates also mean that banks need to invest their funds in high-risk projects to achieve higher investment returns. When investments in these high-risk projects fail, it is difficult for banks to recoup their investments, resulting in broken capital chains, inability to maintain daily operations, and eventual bankruptcy and collapse.
Expansion: In the pursuit of high returns, some small and medium-sized banks have chosen to make high-risk investments in an attempt to obtain more returns. However, high-risk investments often come with high risks. Once the investment project loses money, the bank's capital chain will be broken, and it will be unable to maintain normal business activities. Banks, in particular, that do not have sufficient capital reserves are more likely to fall into crisis. Therefore, small and medium-sized banks need to be cautious in choosing their investment strategies to avoid excessive pursuit of high returns and ignoring risks.
3. Off-balance sheet business in the balance sheet
In order to obtain higher investment returns, some small and medium-sized banks often evade financial supervision by off-balance sheet business. This allows banks to escape from the supervision of regulatory authorities, but it also means that the risks of banks are not effectively controlled. When these off-balance sheet risks are gradually exposed, the capital chain of small and medium-sized banks is likely to break rapidly, eventually leading to bankruptcy.
Expansion: Behind the off-balance sheet business is the underestimation of the regulatory ability of the regulatory authorities. Some small and medium-sized banks have tried to circumvent regulation by converting on-balance sheet operations to off-balance sheet operations, which can reduce loan reserve requirements and increase returns. However, although this practice can achieve high returns in the short term, once the risk arises, the consequences will be unimaginable. Small and medium-sized banks should realize that supervision is the guarantee of safe operation of banks, and only compliant operation can achieve long-term development.
In the face of the frequent bankruptcy and collapse of small and medium-sized banks, depositors need to take some countermeasures to ensure the safety of their deposits.
1. Pay attention to the deposit insurance system
When choosing a bank for deposits, it is important to look to whether the bank participates in the deposit insurance system. The deposit insurance system is a national security mechanism designed to safeguard the safety of depositors' deposits. As long as the deposit is less than 500,000, even if the bank declares bankruptcy and collapse, the safety of the depositor's deposit will be fully compensated. Therefore, depositors should give preference to banks that participate in deposit insurance when depositing to ensure the safety of deposits.
Expansion: For savers, a deposit is a hard-earned piece of money that should be protected, regardless of the amount. The deposit insurance system was established to protect the interests of depositors. The emergence of this mechanism not only gives depositors a sense of confidence in the face of bank bankruptcy, but also improves their risk tolerance. Therefore, depositors should give priority to whether they participate in the deposit insurance system when choosing a deposit bank to improve the safety and security of their deposits.
2. Choose a large state-owned bank
Large state-owned banks are relatively stable because they have the best support behind them, and it is almost impossible for them to go bankrupt and fail. For depositors, keeping their money in large state-owned banks is a safer option. Although the interest rates of large state-owned banks are relatively low, the security of deposits is relatively more secure. Depositors can choose to place larger amounts of deposits in large state-owned banks to ensure the stability and safety of their funds.
Expansion: Large state-owned banks have high stability and security by virtue of their huge capital reserves, strong strength and support. For depositors, choosing deposits in large state-owned banks is a less risky option. Although the interest rates of large state-owned banks are lower, savers can improve their returns through rational investment and financial planning. Therefore, when choosing a deposit bank, depositors can give preference to large state-owned banks to ensure the safety of their deposits.
3. Diversify deposit risk
Instead of keeping all their deposits in one bank, depositors should spread their funds across multiple banks. This can reduce the impact of the bankruptcy of a single bank on the safety of its own funds. Depositors can spread their funds across multiple banks according to their own capital size and needs. For example, the deposits are spread across 5 banks, each with 400,000 deposits, so that even if one bank goes bankrupt, depositors can still receive financial support and full compensation from other banks.
Expansion: Diversifying deposit risk is one of the important strategies to protect the interests of depositors. Although the deposit insurance system can compensate the deposit in full, if the depositor's deposit exceeds 500,000, the excess compensation needs to be paid in a certain percentage after the liquidation. Therefore, to reduce risk, depositors can spread their funds across multiple banks. In this way, even if one of the banks goes bankrupt, the deposits of the other banks remain safe and the interests of the depositors are protected.
In short, in the face of the risk of bankruptcy and collapse of small and medium-sized banks, depositors should pay attention to the deposit insurance system, choose large state-owned banks, and diversify deposit risks. This can effectively improve the security of deposits and protect their own interests. Although small and medium-sized banks go bankrupt and fail from time to time, through reasonable financial planning and risk control, depositors can effectively reduce deposit risks and ensure the safety of their own assets. At the same time, the regulatory authorities should also strengthen the supervision of small and medium-sized banks, strengthen risk prevention and control, and improve the stability and security of the entire financial system.