Kunpeng Project
On January 30, the State Administration of Financial Supervision and Administration held the 2024 work conference to make arrangements for eight aspects of work. This is the first working meeting held by the State Administration of Financial Supervision since its establishment, and the meeting deployed eight specific aspects of work to clarify the work objectives and priorities of the State Administration of Financial Supervision in 2024. Among them, "making every effort to promote the reform of small and medium-sized financial institutions to reduce risks" is the first of the eight tasks, reflecting the great importance attached to accelerating the reform of small and medium-sized financial institutions and preventing and resolving financial risks.
After a period of rapid development, China's financial industry has generated and accumulated certain financial risks. In the global economic downturn, superimposed on the impact of the new crown pneumonia epidemic, the risks in some regions and industries in China have further gathered, the transmission of real economic risks to the financial industry has accelerated, and a small number of small and medium-sized financial institutions have deteriorated into high-risk institutions. Although the number of high-risk institutions has declined in recent years, judging from the problems exposed by individual village and township banks in Henan, Anhui and other places in recent years, the explicit and implicit risks of small and medium-sized financial institutions with rural credit institutions (rural commercial banks, rural credit cooperatives, and rural cooperative banks) and village and township banks as the main body should not be underestimated. Taking various measures to actively and steadily promote the risk resolution of small and medium-sized financial institutions has become an important task to prevent and resolve major financial risks. Therefore, the first financial work conference requires "strict access standards and regulatory requirements for small and medium-sized financial institutions" and "timely disposal of risks of small and medium-sized financial institutions". The work conference of the General Administration of China requires "making every effort to promote the reform of small and medium-sized financial institutions", which is an important measure to implement the spirit of the first financial work conference.
From an international point of view, after the occurrence of previous financial crises, it is often accompanied by a frenzy of financial institution failures, which in turn triggers panic and violence in the financial market. Although there has been no financial crisis in China, there is still a long way to go in the reform of small and medium-sized financial institutions. To promote the reform of small and medium-sized financial institutions, we must not only do a good job in top-level design, but also adhere to local conditions. First of all, it is necessary to further improve the top-level design of small and medium-sized banks to reform and reduce risks. The reform of rural credit cooperatives is the focus of the reform of small and medium-sized banks. It is recommended to issue guidance at the first level to strengthen the overall arrangement for the reform of rural credit cooperatives, further clarify the basic principles and overall requirements that need to be followed in this round of reform and risk reduction, and ensure that the reform and risk reduction work is always on the right path. At the same time, there should also be guiding opinions on the structural restructuring of village and township banks. Second, we should conscientiously follow the principle of adapting measures to local conditions and "one province and one policy" to design specific plans for the reform of small and medium-sized banks. In the course of reform, all provinces should explore new mechanisms and models according to different situations, taking into account the dual goals of promoting development and preventing risks. In the course of reform, the focus and order of reform should be different in different localities. For example, the central and western regions and the northeast should put risk mitigation in the first place, and appropriately set up municipal and provincial rural commercial banks; In the eastern region, the focus is on enhancing the competitiveness of legal entities.
The working meeting of the General Administration of China requires that the normalization mechanism for financial risk disposal be improved, and the responsibilities of institutions, shareholders, executives, regulators, territories and industries should be implemented. The implementation of the responsibilities of the six parties will help establish a more complete risk management mechanism, give full play to the roles of all parties, strengthen overall planning and coordination, and promote the formation of a joint work force. In the next step, efforts should be made to strengthen the main responsibility of financial institutions. Small and medium-sized financial institutions should first strengthen their sense of responsibility, accelerate the transformation of systems and mechanisms, continuously improve corporate governance, strengthen the introduction and training of talents, deepen digital transformation, and enhance the endogenous ability of sustainable development and risk prevention and control. In the next step, small and medium-sized financial institutions should formulate a scientific and pragmatic development strategy, return to their origins, take root in the local area, serve the local area, take the small and medium-sized enterprises and local residents in the region as the main customer groups, and develop steadily in promoting local economic growth and serving the residents, and resolve risks through development.
At the same time, relevant departments and local governments should strengthen policy support and accelerate the reform of small and medium-sized financial institutions. The People's Bank of China (PBoC) and the financial regulatory authorities can take more measures to support small and medium-sized banks to better establish a long-term mechanism for capital replenishment, so that small and medium-sized banks can continue to improve the soundness of their development through capital replenishment. At the same time, we will urge small and medium-sized financial institutions to improve their corporate governance mechanisms and broaden the channels for disposing of non-performing assets of small and medium-sized financial institutions. Local party committees should also increase support for small and medium-sized banks. For example, in the disposal of non-performing assets, territorial risk disposal, etc., to give more real money to small and medium-sized banks; Strengthen communication with regulatory authorities when nominating directors and senior executives. In dealing with real estate financial risks, the competent authorities of the real estate industry should also actively play their due role.
Although the number and proportion of high-risk small and medium-sized financial institutions have decreased significantly in recent years, what remains is basically "hard bones", and the subsequent disposal of risks is more difficult and challenging. Moreover, China's financial market is in the process of development, the risk tolerance of financial consumers is weak, and the reform of small and medium-sized financial institutions will affect the whole body. Therefore, it is necessary to pay more attention to and actively and steadily promote the reform of small and medium-sized financial institutions to reduce risks, and grasp the intensity and rhythm in the process of risk reduction. This is not only a key task to prevent and resolve major financial risks and maintain financial stability, but also an important measure to protect the legitimate rights and interests of financial consumers and maintain social stability. Therefore, the work conference of the General Administration emphasized that it is necessary to grasp the timeliness and efficiency, and carry out the work in a planned and step-by-step manner. Grasping the timeliness and effectiveness well is an important ideological method and work method for doing a good job. To promote the reform of small and medium-sized financial institutions, we must first scientifically understand the opportunity and seize the favorable opportunity to promote the reform and risk reduction work in a timely manner; Second, we must accurately grasp the limits, not only to strengthen the determination to reform and reduce risks, but also to pay attention to working methods and methods to prevent secondary risks; Third, it is necessary to truly achieve results, promote the steady development of small and medium-sized financial institutions through reform, and prevent and resolve systemic financial risks. Emphasizing the timeliness and effectiveness requires that the reform and risk reduction work should be fully promoted and coordinated arrangements.
We will make every effort to promote the reform of small and medium-sized financial institutions and reduce risks, and we must also accurately position small and medium-sized financial institutions and promote the high-quality development of small and medium-sized financial institutions. The high-quality development of small and medium-sized financial institutions will help fill the market that is difficult for large financial institutions in China to take into account, so as to optimize and improve the financial institution system and improve the situation of insufficient and unbalanced financial services. It is necessary to take measures to prevent the "crowding out effect" brought about by the excessive sinking of large financial institutions in the non-market, promote small and medium-sized financial institutions to truly become an important part of the multi-level and wide-coverage financial institution system, and improve the quality and efficiency of financial services, especially the ability to serve small and micro enterprises and rural markets. This is also an important part of building a modern financial system with Chinese characteristics.