In December, two banks were dissolved, and this year it has reached 10
Preface. As a core component of the financial system, banks not only assume basic functions such as savings, loans and payments, but also are key links in ensuring the stable operation of the financial system. However, in recent years, the financial market environment has undergone drastic changes, and small and medium-sized banks are facing increasingly intense market competition and operational pressure. At the end of this year, we received news of the dissolution of two village and town banks, that is, 10 small and medium-sized banks have announced bankruptcy and closure this year. This phenomenon has made most depositors worry about the safety of their deposits, so how should we deal with it?
The reasons for the bankruptcy and collapse of village and township banks.
1) Fierce inter-bank competition: With the liberalization of China's financial licenses, various types of banks have emerged, resulting in increasingly fierce inter-bank competition. Some poorly managed village and township banks found it difficult to survive in the fierce market competition, and eventually declared bankruptcy and collapsed. For example, the collapse of Gaocheng Hang Seng Village Bank and Jinzhou Hang Seng Village Bank is a typical case.
The establishment of village and township banks is an important achievement of the reform of the state's financial system, and is also an important way to strengthen rural financial services and promote economic development. However, due to the small scale and relatively limited level of operation of most village and township banks, the operating capacity of some village and township banks is difficult to match with that of large banks in the face of fierce market competition and development pressure. They often lack the capital, technology, and risk management capabilities to compete with the big banks, making it difficult for them to make a name for themselves in a market economy. Due to fierce competition among the banks, some village and township banks gradually reduced their activities and lost their ability to continue operating, which eventually led to their closure.
2) There are investment risks in high-interest deposits: In order to attract depositors, some village and township banks have adopted the method of high-interest deposits to attract depositors to choose deposits through high interest income. However, high interest rates often mean that banks need to invest their money in high-risk projects to get a higher return on investment. Once these high-risk projects fail, the funds cannot be recovered, resulting in the rupture of the bank's capital chain, and finally declared bankruptcy.
Soliciting high-interest deposits is a common way to attract depositors, which can quickly increase the size of deposits and increase the amount of money in the bank. However, this high-stakes mode of operation also has hidden dangers. On the one hand, high interest rates may cause village and township banks to invest a large amount of money in riskier projects in order to seek a higher rate of return. While this investment strategy can be very successful for a while, these high-risk projects can lead to huge losses when the market environment changes unfavorably. On the other hand, excessively high deposit interest rates will also cause village and township banks to fall into a situation where the capital chain will be broken. If banks are unable to continue to attract depositors, liquidity and funding** will be severely impacted, which will be a fatal blow to the bank's operations.
3) Risks of off-balance sheet business: In order to seek higher investment returns, some small and medium-sized banks use off-balance sheet business to evade the supervision of financial regulators. In this way, banks can not only evade regulatory restrictions, but also earn higher returns on high-risk projects. However, when problems arise in the off-balance sheet operations of these small and medium-sized banks, a large number of bad accounts and exposure to risks will trigger a chain reaction of financial risks, and the small and medium-sized banks will eventually go bankrupt due to the depletion of funds.
Off-balance sheet operations refer to the use of various methods by banks to convert accruals into off-balance sheet items in order to mask the true assets and liabilities in their financial statements. The main purpose of these measures is to obtain high investment returns. However, this practice is not only illegal, but also carries significant risks in terms of management and supervision. Once a bank converts off-balance sheet business to on-balance sheet business on a large scale, it often means that the bank has huge hidden risks, and the bank's ability to control these hidden risks tends to decline. When these risk factors become apparent, banks are powerless to deal with them, and the outcome is bound to be bankruptcy.
How to protect depositors' deposits.
Faced with the risk of bankruptcy and collapse of small and medium-sized banks, depositors can take the following measures to effectively protect the safety of deposits:
1.Pay attention to the deposit insurance sign: When making a deposit, pay attention to whether the bank has a deposit insurance sign. As long as the bank participates in deposit insurance, even if the bank goes bankrupt and fails, the depositor's deposit security will be fully compensated. Therefore, it is relatively safe to choose to deposit with a bank that is insured by deposits.
2) Diversify deposit risk: Depositors should try to avoid concentrating all their deposits in one bank and instead choose to spread their deposits across several banks. This can effectively reduce the risk exposure of a single deposit, and will not cause excessive financial losses in the event of bank bankruptcy.
3.Choose state-owned banks: Large state-owned banks have a high level of professionalism and resource advantages in market competition and risk prevention, which are relatively safer and more reliable. As a result, depositors may prefer to keep their deposits in state-owned banks to ensure their safety.
With regard to the security of depositors' deposits, it is necessary to take preventive measures not only from the perspective of depositors but also from the perspective of the system. Depositors can consider the following points when choosing a deposit bank: First, depositors should pay attention to whether the bank participates in deposit insurance, which is an important guarantee for the safety of deposits. The deposit insurance system is an important measure implemented by China's financial regulatory authorities, and in the event of bank failure, depositors' deposits can be guaranteed by full compensation. Second, depositors can choose to spread their deposits across multiple banks, which can reduce concentration risk and minimize losses in the event of a bank's failure. In addition, depositors can also choose to keep their deposits in large state-owned banks, which are relatively stable, stable and relatively safe and reliable.
Conclusion. Small and medium-sized banks are facing increasing operating pressure and market competition, which has led to the bankruptcy and closure of some banks. In the face of this situation, depositors should try their best to choose banks with deposit insurance signs, diversify deposit risks, and choose measures such as depositing in large state-owned banks to ensure the safety of deposits. In addition, the regulatory authorities should also strengthen the supervision of small and medium-sized banks, improve the operational capabilities and risk management level of small and medium-sized banks, and avoid the negative impact of bank insolvency and bankruptcy on the financial system and social economy.