On March 3, 2022, the website of the people’s Bank of China released the article of the financial stability bureau, “financial risks are converging day by day, and the stability foundation is more solid”. The full text is divided into three parts: the first part reviews three large-scale financial risk governance. Through three rounds of regulation, the major risks of financial operation have been effectively resolved. There has been no systemic financial risk in China. The second part reviews the important achievements made in preventing and resolving financial risks since the 19th national congress, controlling the rapid rise of macro leverage ratio, disposing of high-risk enterprises, cleaning up and rectifying financial order, reducing shadow banks and so on. In the third part, the current chassis of China’s financial system is stable, the overall stability of banking and financial institutions, the concept of rule of law and marketization are comprehensively strengthened, and the long-term mechanism of risk prevention and control is becoming more and more perfect.
Unlike previous regulatory documents, which talk more about risks and problems, this document affirms the achievements of financial risk governance and expounds the stability of the foundation of China’s financial system, which is intended to strengthen the confidence of the financial system. “Stability” is the first and core. Since the conflict between Russia and Ukraine, the international situation has been tense. The economic, financial and other sanctions imposed by the United States and Europe on Russia have triggered panic and concern in the international market, and the overseas market has fluctuated sharply. In such an international environment, China has a higher demand for the stability of the financial system and economy. China’s financial regulatory environment and policies may be adjusted, which will pay more attention to “stability” and stabilize expectations. Or it will pay more attention to ensuring the stable operation of the financial industry and the loose liquidity environment of the financial market, strengthen the tracking and early warning of financial operation, and the means of risk prevention and risk disposal will be more cautious and gentle, and the supervision and treatment of weak institutions may be more cautious and stable.
The macro leverage ratio tends to be stable, and the long-term regulatory mechanism continues to be improved
This time, it is confirmed that the macro leverage ratio will be 272.5% in 2021, and “return to the basic stable track”, so as to ensure financial stability and controllable risk from a macro perspective. Since the current round of risk remediation, the tracking, guidance and control of banking and other financial institutions by regulators have tended to be strengthened, and the transmission and implementation of regulatory objectives have been more effective and accurate. The document mentioned that the central and local supervision work together to form a joint force and strengthen the systematic and important financial control supervision. Financial supervision and risk prevention effectively cover all kinds of financial institutions at all levels nationwide and locally, and have formed a long-term mechanism.
After continuous financial risk governance, the level of internal governance and risk control of the banking industry continued to improve.
After the governance of shadow banking risk reduction, disposal of high-risk groups and institutions and financial anti-corruption, the overall asset quality of the banking industry has been improved, the rectification of new asset management regulations has been basically completed, and the prevention and control of on balance sheet and off balance sheet risks has been significantly improved.
Banking financial institutions are generally stable, and large and medium-sized institutions perform well
The article pointed out that in terms of the risk rating of the banking industry by the people’s Bank of China, 4082 of the 4398 banking financial institutions in Q4 in 2021 were rated within the safe boundary, accounting for nearly 99% of the assets, and 316 high-risk institutions accounted for only 1% of the assets. Large and medium-sized institutions have a ballast effect on the stability of China’s financial system. The ratings of 24 large and medium-sized banks with assets accounting for about 70% continue to be excellent, and the main business indicators of some banks are in the leading position in the world.
In the context of increasing economic and financial uncertainty overseas, financial supervision will be more stable to prevent systemic risks and possible external shocks. For the banking industry, its business stability has become more important. On the one hand, the requirements for anti risk ability and risk control may be higher. On the other hand, regulatory measures may need to be more moderate to prevent secondary risks and expected fluctuations. Steady growth and steady real estate policies continue to catalyze, and the bank market will continue. I reiterate my optimism. In terms of individual stocks, it is recommended to pay attention to urban and rural commercial banks with rapid performance growth, such as Bank Of Jiangsu Co.Ltd(600919) , Jiangsu Changshu Rural Commercial Bank Co.Ltd(601128) , Bank Of Hangzhou Co.Ltd(600926) , etc. continuous recommendation of core targets: Bank Of Ningbo Co.Ltd(002142) , China Merchants Bank Co.Ltd(600036) , Postal Savings Bank Of China Co.Ltd(601658) .
Risk tip: the deterioration of asset quality caused by economic downturn exceeded expectations.
