Recently, the people's Bank of China announced the rating results of financial institutions in the fourth quarter of 2021, the sixth public rating results since 2018. The main concerns are as follows:
The overall rating of the banking industry is good, and the operating chassis is relatively stable. The central bank's financial institutions have a total rating of 11 levels. The higher the level, the higher the risk. More than 8 levels are listed as high-risk institutions. In this rating, the number of banks and assets within the level 1-7 security boundary account for 93% and 98% of all rating agencies. The overall risk of the industry is controllable and the operational robustness continues to improve. In particular, 24 large banks, including state-owned commercial banks, development and policy banks and joint-stock banks, have been rated well in recent years. More than half of the banks in this rating are grade 1 and 2. These large banks account for about 70% of the total assets of the banking industry, while the assets of Bank Of China Limited(601988) industry account for about 90% of the assets of the financial industry, which is an important ballast for maintaining financial stability. At present, high-risk institutions are mainly concentrated in rural cooperative medical institutions and rural banks, with a relatively small scale. In case of business deterioration and M & a disposal, it will have a relatively small impact on the overall operation and development of the banking industry and regional financial stability.
As the number of critical banks increases, we need to pay attention to the risks of small and medium-sized banks and resolve the pressure. The number of high-risk institutions in the central bank's rating has halved from the peak level of 649 in the third quarter of 2019 to 316 for six consecutive quarters, and is expected to drop to within 200 by the end of the 14th Five Year Plan period. However, the number of banks rated as grade 7 and just within the safe boundary totaled 808, an increase of 110 compared with the second quarter of 2021. In the post epidemic era, the economic and financial environment outside China is facing many impacts and changes, which brings great challenges to the steady operation of Bank Of China Limited(601988) industry. Compared with other banks within the security boundary, these banks are less robust in operation, have many problems in internal management and financial status, and are extremely vulnerable to changes in the economic and financial environment. It is urgent to optimize the corporate governance system, asset structure and business structure in time to avoid further evolution into high-risk institutions.
The distribution of high-risk institutions has regional concentration. It is suggested to pay attention to the supervision of mergers and related party transactions of small and medium-sized banks. In recent years, the regional concentration of high-risk institutions has become more and more obvious. In this central bank rating, 11 provinces in China have no high-risk institutions, and 13 provinces have single digit high-risk institutions; High risk institutions are mainly concentrated in four provinces, all of which are in the north. In order to continuously maintain regional financial stability and improve the operational stability of regional small and medium-sized banks, we need to pay attention to the following two aspects. On the one hand, we should attach great importance to the effectiveness of related party transaction supervision and concentration supervision, and continue to optimize the corporate governance mechanism of small and medium-sized banks. Related party transactions and business concentration are the root causes of risk spread and Risk Spillover of many regional small and medium-sized banks. Previously, financial institutions with greater risk spillover, such as subcontractor bank, Jinzhou bank and Hengfeng bank, were handled steadily, effectively maintaining regional financial stability. On the other hand, we will steadily and orderly promote the merger and reorganization of small and medium-sized banks. In the post epidemic era, the banking industry is facing new opportunities and challenges of reform and transformation. Some small and medium-sized banks are "holding together for warmth", and large-scale mergers and acquisitions have occurred in some regions. At present, Liaoshen bank, Shanxi Bank and Sichuan bank have been successfully opened, which provides strong support for maintaining local financial stability and improving the efficiency of financial services.
The application scenarios of rating results are constantly enriched, and banks need to strengthen regulatory communication. The central bank's rating results were first used to implement differentiated deposit insurance rates, and then gradually extended to a series of differentiated policies and measures such as risk monitoring, early correction and risk disposal. The 2021 China financial stability report made it clear that the people's Bank of China would take early corrective measures based on the rating results, including "one-to-one" notification, interview with senior executives, issuing risk reminder letters and rating opinions, etc. By the end of 2020, the central bank had taken early corrective measures against 635 institutions, and 353 institutional risks had been preliminarily resolved. At the same time, the central bank will also make full use of the rating results in the fields of approving the issuance of bonds by financial institutions, carrying out macro Prudential assessment (MPA) and issuing inclusive small and micro credit loans, and provide reference opinions for the issuance and listing, capital increase and share expansion of the CSRC to guide the prudent operation of banks. At present, there are three main types of bank ratings, namely, the bank supervision rating of the CBRC, the financial institution rating of the people's Bank of China and MPA evaluation. As the regulatory communication mechanism and rating sharing mechanism continue to be unblocked, the application scenarios of rating results will continue to be enriched. The banking industry needs to attach great importance to various rating results, continue to communicate with the regulatory authorities, and constantly improve its steady operation ability.
