"Qushi" magazine published an article "Unswervingly fight the battle to prevent and resolve financial risks"
Guo Shuqing: The bubble of real estate financialization has been curbed
On August 16, the central bank’s official WeChat account forwarded the signed article “Unwaveringly Fighting the Tough Battle to Prevent and Resolve Financial Risks” published by the People’s Bank of China Party Committee Secretary and Chairman of the China Banking and Insurance Regulatory Commission, published in the 16th issue of the magazine “Seeking Truth” in 2020. .
The article stated that a substantial breakthrough has been made in the battle to prevent and resolve financial risks, the blind expansion of financial assets has been fundamentally reversed, shadow banking risks have continued to converge, the bubble of real estate finance has been curbed, and Internet financial risks have been drastically reduced. After continuous efforts, financial risks tend to converge, and the resilience of the financial system has increased significantly. At the same time, my country's financial system is also facing many challenges and difficulties. It is necessary to further improve the quality and efficiency of financial services, but also to deal with prominent risks in key areas in an orderly manner, so as to achieve a long-term balance of stable growth and risk prevention.
The blind expansion of financial assets has been fundamentally reversed
The data provided by the article shows that from 2017 to 2019, the average annual growth rate of credit funds and bond investment provided by the banking industry to the real economy was as high as 12.1% and 13.9%, while the average annual growth rate of assets was only 7.7%, which was not as high as that in 2008 Half of 2016 is equivalent to an additional investment of 64 trillion yuan in the real economy, while the banking industry’s assets have decreased by 88 trillion yuan. The aggressive investment and wealth management business of the insurance industry has been curbed, and the proportion of short- and medium-term insurance premiums for life insurance has dropped from a historical high of 31% to 4%. The corporate sector's leverage ratio has been steadily declining, while the growth rate of residents and government sector leverage has slowed. The macro leverage ratio reversed the trend of an average annual increase of more than 10 percentage points from 2008 to 2016, and has stabilized at around 250% in the past three years.
The hidden risks of shadow banking in my country were once very serious. Shadow banks are nested layer by layer, with hidden risks, and are closely intertwined with real estate bubbles, local hidden debts, and illegal Internet financing. In 2017, we began to focus on rectifying non-standard interbank, wealth management and off-balance sheet businesses. In 2018, the new asset management regulations were implemented. After several years of hard work, we have initially shown a fundamental improvement momentum. At the end of 2019, the scale of shadow banking dropped by 16 trillion yuan from its historical peak. Interbank wealth management, interbank investment and securities firm asset management were reduced by 87%, 26%, and 42% respectively from their peaks. Entrusted loans, trust loans and various cross-financial investment products continued to shrink. Some international organizations and professional institutions have spoken highly of it, believing that China has made the most significant achievements in reducing shadow banking risks and fundamentally maintained the stability of the financial system.
In response to the more common asset quality issues, financial institutions have been inspected and evaluated from multiple angles, and risk assets are strictly required to be carefully classified. Resolutely punish concealing bad assets and crack down on fraudulent accounts. The ratio of loans overdue for more than 90 days to non-performing loans of commercial banks exceeded 128% in 2016 and dropped to 82% at the end of 2019. In three years, the banking industry has disposed of 5.8 trillion yuan of non-performing loans, which is more than the total amount disposed of in the previous eight years. At the same time, accelerating the replenishment of capital and increasing provisions have comprehensively improved the strength of various financial institutions to deal with external shocks.
The growth rate of real estate loans fell by 12% in three years
The article believes that the real estate bubble is the biggest "gray rhino" threatening financial security. In recent years, various regions and departments have optimized the allocation of financial resources in accordance with the spirit of "housing, housing, no speculation" and "one city, one policy" to prevent illegal capital flowing into the real estate market. Compared with 2016, the growth rate of real estate loans dropped by 12% in 2019, and the proportion of new real estate loans in all new loans dropped by 10%. It not only meets the normal needs of the stable development of the real estate industry, but also avoids greater risks due to excessive capital concentration.
Guo Shuqing said in the article that a large number of "unlicensed driving" platforms once engaged in financial activities illegally in my country, many of which confuse people under the banner of financial innovation and "Internet +". After centralized rectification, the risk situation in the Internet finance field has improved significantly, and the chaos that "bloomed everywhere" in the past has been rectified. A large number of illegal Internet wealth management, insurance, securities, fund and token institutions have been banned. The number of P2P online lending institutions actually operating across the country dropped from about 5,000 during the peak period to 29 at the end of June 2020. The scale of borrowing and the number of participants have declined for 24 consecutive months.
As of the end of 2019, about 20,000 debt committees have been established nationwide, and 1.4 trillion yuan of debt-to-equity swaps have been implemented in a market-oriented and legal manner, helping a large number of companies with development potential to tide over the difficulties. The bond default and stock pledge risks of a large number of companies with difficult liquidity have been mitigated, and a considerable number of "zombie companies" with outdated production capacity or poor management have been cleared out in an orderly manner. Approximately 500 large and medium-sized enterprises have implemented joint credit extension pilot projects, and the endogenous motivation of debt constraints has been significantly enhanced.
Regulators fined 7.24 billion yuan for three years
From 2017 to 2019, the regulatory authorities seriously held accountable financial institutions and employees for violations of laws and regulations, penalized 8,818 bancassurance institutions, and 10,713 persons responsible. The total amount of fines and confiscations was 7.24 billion yuan, more than the sum of the previous decade. Through efforts to make up for shortcomings in the system, supervision work has been further brought into the track of legalization. Since 2017, a total of 209 banking and insurance industry regulatory rules and regulatory documents have been issued and implemented. The development philosophy and business model of financial institutions that emphasize speed over quality have been corrected to a large extent.
Inclusive small and micro enterprise loans average annual growth rate of 23.2%
From 2017 to 2019, RMB loans increased by 46 trillion yuan. Among them, loans for infrastructure, affordable housing projects, and manufacturing industries increased by 8 trillion yuan, 3.3 trillion yuan and 1.6 trillion yuan respectively. The average annual growth rates of scientific research technology, information software, and ecological and environmental protection loans reached 31.2%, 20.8% and 19.5% respectively, which were significantly higher than the average growth rate of loans over the same period. Small and micro enterprise financing has achieved “increased volume, expanded coverage, and reduced prices”. Inclusive small and micro enterprise loans have an average annual growth rate of 23.2%. The coverage rate of basic financial services in poor areas is close to 99%. In 2019, critical illness insurance covered more than 1.1 billion urban and rural residents, and the amount of agricultural insurance risk coverage exceeded 3.8 trillion yuan. Insurance compensation has become an important source of funds for recovery and reconstruction after various natural disasters.
The article pointed out that for a period of time in the future, my country's economic supply and demand ends, both domestic and foreign markets are under pressure at the same time, and the financial system is bound to encounter great difficulties.
In order to contain the recession, when economic activity shrinks sharply, financial activity must instead expand. The original control target was that the growth rate of broad money and social financing was slightly higher than the growth rate of nominal GDP, and was more than 10 percentage points higher in the first half of this year. It is expected that the overall leverage ratio and sub-sector leverage ratio will rebound significantly this year, and the bad debts of financial institutions may increase substantially. In 2019, the banking industry newly formed 2.7 trillion yuan of non-performing loans. After the "black swan" of the epidemic, it is inevitable that asset quality will double and deteriorate. Due to the time lag in the financial and financial response, the current asset classification has not accurately reflected the true risks, and the bank's spot book profits have a large inflated component. This situation will not last forever, and non-performing assets will be exposed gradually.
The article stated that resolutely rectify illegal financial groups and illegal financial activities, and orderly promote asset cleanup, recovery of stolen goods, and risk isolation. Protect legal income, ban illegal income, and deal with problematic shareholders who maliciously manipulate financial institutions in accordance with the law. Taking over the Baoshang Bank in accordance with the law, while fully protecting the interests of depositors, break the rigid payment, promote credit stratification, and strictly enforce market discipline. Dispose of companies with serious violations of laws and regulations such as Anbang Group and Huaxin Group in accordance with the law, and timely reorganize, reorganize, and bankrupt and liquidate several holding companies suspected of handling financial business in violation of regulations. Promote high-risk small and medium-sized banks and trust companies to carry out reforms, reorganizations and risk management under the "one enterprise, one policy" policy. A group of corrupt elements involved in collusion between officials and businesses, transfer of interests, and illegal encroachment have been brought to justice, and some of them are financial management staff who "guard and steal".
Financial resources may be concentrated in high-risk areas
"A series of macro hedging policies adopted in response to the epidemic are very necessary. In case of new abnormalities in the implementation, further efforts may be intensified. However, we cannot fail to see that under the background of loose funding, enterprises, residents, and governments are all Debt may increase. After the expectations of downward consistency in interest rates are strengthened, it may encourage leveraged trading and speculation, and spawn a new round of asset bubbles." Guo Shuqing pointed out in the article that real estate prices in some places have begun to rebound, and financial resources may rise again. Concentration of risk areas. Borrowers with poor credit may use preferential policies such as deferred repayments to maliciously escape debts, and high-risk shadow banks with complex structures are also likely to make a comeback.
Regarding the unlimited quantitative easing policies implemented by other countries, Guo Shuqing believes that in the short-term, this approach is conducive to stabilizing the economy and finance, but there is great uncertainty in the medium- and long-term effects. There is no free lunch in the world, and there is no permanent banquet in the world. In an international monetary system dominated by the US dollar, the unprecedented unlimited quantitative easing policy of the US actually consumes the credit of the US dollar, erodes the foundation of global financial stability, and will have unimaginable negative effects. Emerging economies may face multiple pressures such as imported inflation, shrinking foreign currency assets, exchange rate and capital market volatility. More serious is that the world may once again be on the verge of a global financial crisis.
He also pointed out that the rapid development of financial technology in recent years has brought us many opportunities as well as great challenges. my country's financial technology ranks among the top in the world in some areas, and there is no existing experience in risk prevention and control to learn from. Due to the widespread application of high-tech such as big data, cloud computing, and artificial intelligence, the manifestations of traditional financial risks and the path of infection have undergone profound changes, and non-traditional risks such as data security have become increasingly prominent. These risks have strong suddenness, concealment and destructive power, and we cannot but arouse our high vigilance.
"Capital preservation and high yield" is financial fraud
In the face of the complex and severe economic situation, Guo Shuqing said that it is necessary to "stabilize the overall situation, make overall plans and coordinate", further improve the quality and efficiency of financial services, and promote economic development as soon as possible. Deal with prominent risks in key areas and achieve a long-term balance between stable growth and risk prevention.
The article proposes to prevent high-risk shadow banks from rebounding. At present, shadow banking has undergone unremitting governance and risks have been controlled to a certain extent, but the soil for survival has not been completely eradicated. A slight deregulation may lead to a full resurgence and abandon all previous efforts. It is necessary to maintain strategic determination and maintain high pressure on high-risk businesses. Highlight the principles of simplicity and transparency, standardize cross-financial products, achieve a clear boundary between public offerings and private offerings, isolation of on-balance sheet and off-balance sheet business risks, separate account management for entrusted and self-operated businesses, and a clear distinction between savings products and investment products. Strive to achieve a clear and orderly division of responsibilities for the stock market, bond market, credit market and money market. At the same time, continue to rectify Internet financial risks, and severely crack down on illegal financial activities such as illegal fund-raising.
At the same time, education and protection of financial consumers must be strengthened. Strengthen the popularization of financial knowledge so that both urban and rural residents understand that investment is risky. There is no financial product with high return and low risk in the world, and there is no so-called "stable profit but no loss" financial management project. Propagating that "guarantee high return" is financial fraud . Institutional and individual investors must establish value investment, rational investment and risk prevention awareness. Promote the spirit of contract, strengthen the awareness of the rule of law, adhere to the law, and increase the cost of violations. Simplify product structure, strict customer stratification, and report risks truthfully. Strengthen information disclosure and improve market transparency. Speed up the construction of the social credit system, further improve the joint punishment mechanism for untrustworthiness, and promptly correct all kinds of violations of laws and regulations that mislead financial consumers.
Text/Reporter Cheng Jie