China State Construction Engineering Corporation Limited(601668) report on continuous risk assessment of China Construction Finance Co., Ltd
In accordance with the relevant requirements of the guidelines for self discipline supervision of listed companies on Shanghai Stock Exchange No. 5 – transactions and related party transactions, China State Construction Engineering Corporation Limited(601668) (hereinafter referred to as “joint stock company”) conducted continuous risk assessment on the holding of CSCEC Finance Co., Ltd. (hereinafter referred to as “CSCEC finance”), reviewed the regular financial reports and operational process data by checking the certificate materials such as the financial license, business license and so on, The risk status of CSCEC finance as of December 31, 2021 has been assessed, and the risk assessment is reported as follows.
1、 Establishment, business scope and organizational structure of CSCEC Finance Co., Ltd. (I) basic information
CSCEC finance was established with the approval of the former Bank Of China Limited(601988) industry supervision and Administration Committee, with a registered capital of 10 billion yuan. The shareholders are China State Construction Engineering Corporation Limited(601668) Group Co., Ltd. (holding 20%) and China State Construction Engineering Corporation Limited(601668) (holding 80%).
Registered address: unit 01, 30th floor, building 3, yard 5, Anding Road, Chaoyang District, Beijing legal representative: Yan Liangjun
Financial license institution code: l0117h211 Ping An Bank Co.Ltd(000001)
Unified social credit Code: 9111 Shenzhen Ecobeauty Co.Ltd(000010) 0018144h
(II) business scope
According to the measures for the administration of financial companies of enterprise groups and the relevant replies of the China Banking and Insurance Regulatory Commission, the business scope of CSCEC finance includes: handling financial and financing consulting, credit assurance and related consulting and agency business for member units; Assist member units to realize the receipt and payment of transaction funds; Approved insurance agency business; Provide guarantee to member units; Handle entrusted loans between member units; Handle bill acceptance and discount for member companies; Handle the internal transfer settlement between member units and the corresponding settlement and clearing scheme design; Absorbing deposits from member units; Handle loans and financial leases for member units; Engage in interbank lending; Securities investment (excluding stock investment); Domestic and foreign currency businesses of the above businesses.
(III) organizational structure
CSCEC’s financial norms set up “three meetings and one layer” composed of the board of shareholders, the board of directors, the board of supervisors and the management. Among them, the board of directors has a strategy and compensation management committee, a risk management committee and an audit committee; The management level has a credit review committee and an investment decision-making committee. At present, there are 11 functional departments.
2、 Operation and regulatory indicators of CSCEC Finance Co., Ltd
(I) operation
As of December 31, 2021, CSCEC had total financial assets of 107386 billion yuan, total liabilities of 94.371 billion yuan, total owner’s equity of 13.015 billion yuan and asset liability ratio of 87.9%. In 2021, it realized operating revenue of 2.908 billion yuan, total profit of 1.101 billion yuan and net profit of 826 million yuan.
(II) supervision indicators
According to the measures for the administration of financial companies of enterprise groups, CSCEC finance continuously monitors various regulatory indicators. As of December 31, 2021, all indicators meet the regulatory requirements.
Specified value of regulatory items actual value by the end of December 2021
Capital adequacy ratio ≥ 10% 12.32%
Non performing asset ratio ≤ 4% 0
NPL ratio ≤ 5% 0
Guarantee ratio ≤ 100% 78.30%
Investment ratio ≤ 70% 14.52%
Borrowing ratio ≤ 100% 0
3、 Risk management system of China Construction Finance Co., Ltd
CSCEC finance has established and improved the risk management system in accordance with the company law, the guidelines for internal control of commercial banks, the measures for the management of financial companies of enterprise groups and other relevant laws and regulations, as well as the requirements for the construction of the risk management system of the joint stock company.
(I) risk management organization system
CSCEC finance relies on the board of directors, the board of supervisors and the management to carry out risk management under a sound governance structure.
1. Board of directors: ensure the allocation of resources required for risk management, formulate risk management policies and procedures, establish and implement effective risk management mechanism, supervise the management to carry out comprehensive risk management, and bear the ultimate responsibility for the independence and effectiveness of risk management. The board of directors has a risk management committee and an audit management committee, which exercise their functions and powers within the scope of their duties and assist the board of directors in risk management.
2. Board of supervisors: supervise the risk management performance of the board of directors, managers and senior managers and the development of the company’s risk management in accordance with laws and regulations, the articles of association and management system.
3. Management: responsible for the organization and implementation of risk management, with credit review committee and investment decision-making committee.
Credit review committee: as the pre deliberative body for the management to consider and make decisions on credit business, it provides opinions on business review, business risk control, etc., and submits the deliberation items and deliberations to the competent decision-making body for approval.
Investment decision-making committee: as the pre deliberative body for the management to consider and make decisions on investment business, it provides investment business direction and strategy, investment business review opinions, etc., and submits the deliberation items and deliberations to the competent decision-making body for approval.
Management department: CSCEC finance sets up independent risk management and internal audit departments in accordance with the principle of “three lines of defense” of front office, middle office and back office, and effectively carries out risk control and audit supervision in accordance with the principle of separation.
To sum up, CSCEC’s financial risk management organization system is sound, with clear division of labor and standardized operation, which provides an organizational basis for legal and compliant operation and effective risk control.
(II) risk management system
In order to improve the level of risk management and effectively prevent and resolve business risks, CSCEC finance has formulated risk management regulations and compliance management regulations, and also established a relatively complete management system at the business level.
1. Fund settlement business
According to the characteristics of settlement business, CSCEC finance has formulated management systems such as internal control management measures for settlement business, management measures for deposit reserve business and management measures for RMB deposit business of group member units, with clear business processes and management authority, so as to effectively control the risk of capital settlement business.
2. Credit business
According to the credit policy and business variety, China construction finance has formulated the management system of comprehensive credit management, loan business management, commercial draft acceptance and discount business management, and has made clear the requirements of unified credit and gradual approval. Top note survey, loan management and post loan management have been organized, and loan use has been strictly examined to effectively prevent credit business risks.
3. Investment business
In order to standardize the investment behavior, CSCEC finance has formulated management systems such as the working rules of the investment decision-making committee and the management measures of CSCEC financial investment business, played the guidance and control role of the investment decision-making committee, clarified the acceptance, review and approval process of investment business, standardized pre investment review and post investment management, and effectively prevented and controlled investment business risks.
4. Information system construction
CSCEC finance continued to strengthen the construction of information system, formulated management systems such as data disaster backup management measures and network and information security management measures, and made provisions on information infrastructure construction, application software system development, system operation and data disaster recovery, so as to provide a strong guarantee for realizing data security, network security and playing the role of risk management.
In conclusion, CSCEC’s financial risk management system is sound, all businesses operate in accordance with rules and regulations, and the implementation of the system is good.
4、 Risk control of China Construction Finance Co., Ltd
(I) risk identification and assessment
After analyzing and evaluating the operation of CSCEC finance in 2021, combined with the changes of internal and external environment, the main risks identified include liquidity risk, credit risk, compliance risk and operational risk.
(II) risk control measures
In order to effectively control various risks, CSCEC finance has formulated corresponding risk control measures to strictly control risks.
1. Liquidity risk control
In order to prevent liquidity risk, CSCEC finance has formulated the liquidity management measures to pay close attention to macro policy changes, carefully analyze the impact of internal and external environment on liquidity, strengthen liquidity index monitoring and early warning, and form an effective liquidity control mechanism. CSCEC finance takes the liquidity index as the focus of daily monitoring, forecasts the liquidity and reserve funds at key time points in advance, pays attention to the matching and stability of capital sources, and ensures the safety and sufficiency of positions. Overall, CSCEC finance did not have liquidity lower than the regulatory requirements in 2021, and the liquidity risk was controllable. 2. Credit risk control
In order to prevent credit risks, CSCEC finance pays close attention to the operation, financial capital and solvency of credit customers. Give full play to the functions of the credit review committee, implement the separation of loan review and standardize the loan review mechanism; Strictly implement various credit policies and review the use of funds; Strengthen credit risk monitoring and early warning to ensure the safety of credit assets. At present, the financial non-performing asset ratio and non-performing loan ratio of CSCEC are 0, the asset quality is stable and the credit risk is controllable.
3. Compliance risk control
In order to prevent compliance risks, CSCEC finance pays close attention to the guidance of financial policies, continuously tracks the changes of laws, regulations and regulatory policies, timely improves the system according to the changes of policies, and effectively embeds compliance requirements into employees’ post responsibilities and various operation links. CSCEC finance deeply carried out the activity of “construction year of internal control and compliance management”, strengthened the publicity and implementation of compliance policies and improved the compliance awareness of all employees. Compliance risk is controllable.
4. Operational risk control
In order to prevent operational risks, CSCEC finance continued to improve the management system and strengthen the risk control of important businesses, key posts and key links; Continuously optimize the approval management authority according to the business variety, standardize the business process through the information system, continuously improve the standardized management level, and control the operational risk.
To sum up, CSCEC finance has formulated corresponding control measures in terms of various risk prevention, and the overall risk is controllable.
5、 The related deposits and loans between CSCEC Finance Co., Ltd. and the controlling shareholder of the company were reviewed at the first extraordinary general meeting of shareholders of the company in 2021. CSCEC finance and the controlling shareholder of the company, CSCEC group, signed the financial service framework agreement. In 2021, the daily maximum deposit balance (including accrued interest) of CSCEC group and its subsidiaries (excluding joint-stock company and its subsidiaries, hereinafter referred to as “CSCEC group and its subsidiaries”) in CSCEC finance was 8.51 billion yuan, and the daily maximum loan balance (including accrued interest) was 6.82 billion yuan. The related deposit and loan business between CSCEC finance and CSCEC group and its subsidiaries complies with the financial services framework agreement. 6、 Conclusion
Based on the above analysis and judgment, the joint stock company generally believes that CSCEC finance has legal and effective business qualification, operates in accordance with the law, all regulatory indicators meet the regulatory requirements, there are no major defects in risk management, and the risk of related deposit and loan business at present is controllable.
China State Construction Engineering Corporation Limited(601668)
April 15, 2022
