The reform of small and medium-sized banks is increasingly showing a trend of holding together for warmth.

Recently, the official website of the China Banking and Insurance Regulatory Commission revealed that the China Banking Regulatory Commission has approved the "Request for Instruction on the Merger of Yingkou Coastal Bank, Liaoyang Bank, Yingkou Coastal Bank, and Dissolution of Liaoyang Bank by Liaoshen Bank."

Since last year, small and medium financial institutions have been merged and reorganized in Sichuan, Yunnan, Shanxi, Shaanxi and other places, and new city commercial banks have been established in some areas.

  Industry experts believe that under the background of accelerating the supply-side structural reform of the financial industry, the merger and reorganization of small and medium-sized banks will help integrate resources and learn from each other’s weaknesses. "Stubborn diseases", deepen reforms, effectively improve the quality of assets, and build a firm bottom line for risk prevention.

  Save yourself and save others

  In recent years, due to the impact of the accelerated transformation of the industry and the impact of the new crown pneumonia epidemic, some small and medium-sized banks have increased their non-performing ratios, and there is greater pressure on capital replenishment.

In order to resolve non-performing assets and "replenish blood" in a timely manner, in addition to multi-channel acquisition of reserves, small and medium-sized banks with certain market financing capabilities have also chosen various methods such as debt issuance and fixed increase, and some have even launched "blood replenishment packages."

  Since September this year, Hunan Xiangxiang Rural Commercial Bank, Anhui Wangjiang Rural Commercial Bank, Anhui Zongyang Rural Commercial Bank, and Shandong Longkou Rural Commercial Bank have all launched a "blood-enrichment package" of "subscription of shares + purchase of non-performing assets" in the fixed increase plan.

For example, Hunan Xiangxiang Rural Commercial Bank issues new shares at a price of 1 yuan per share, and at the same time, the subscriber shall pay another 1 yuan per share to purchase the bank’s non-performing assets.

  The main reason why banks launched a fixed increase "package" is to dispose of non-performing assets as soon as possible.

Anhui Wangjiang Rural Commercial Bank mentioned in its directional offering prospectus that as of June 30, 2021, the bank’s capital adequacy ratio, non-performing loan ratio, and provision coverage ratio indicators were 8.63%, 6.08%, and 90.06%, respectively. "Reporting period The above-mentioned regulatory indicators of the domestic company have continued to improve, but they have not yet reached the regulatory requirements. Although the company has not been punished by the regulatory authorities for failing to meet the above-mentioned regulatory indicators, the risk of being punished by the regulatory authorities for non-compliance with the regulatory indicators cannot be ruled out in the future."

  Zhou Maohua, a macro researcher at the Financial Markets Department of Everbright Bank, believes that some small and medium-sized banks are under greater pressure to replenish capital and have fewer channels for non-performing disposal. In addition, for risk prevention considerations, institutions are required to consolidate risk responsibilities, and small and medium-sized banks do everything possible to replenish capital. It is not difficult to understand.

  Small and medium-sized banks with market financing capabilities are undoubtedly lucky. There are also a few bank shares that have been sold at auctions many times, and they have reached the point where no one cares about them.

Public information shows that on September 25, the second auction of 165 million shares of Fuxin Bank failed again due to no bids.

In 2020, the bank's net profit was only 18 million yuan, a year-on-year decline of more than 90%.

In addition, net interest income, which accounts for a larger proportion of revenue, fell by 62.47%.

  The decline in operating performance indicators directly affects the bank's asset quality and also discourages market funds.

According to statistics from market institutions, since the beginning of this year, more than 110 small and medium-sized banks have entered the "sale" stage due to repeated auctions, and nearly half of the "sale" process has failed due to no one in the transaction.

  However, it is not all bad news for Fuxin Bank.

The Bank of Liaoshen, approved by the China Banking and Insurance Regulatory Commission, will merge 12 city commercial banks in Liaoning Province. The first to be merged is Liaoyang Bank and Yingkou Coastal Bank. The remaining 10 banks, including Fuxin Bank, will also be merged. It will be gradually merged and reorganized in the next two years.

  Industry experts believe that in the past two years, regulatory authorities have repeatedly mentioned that some regional banks have problems such as poor corporate governance, unclear business development positioning, and insufficient risk control capabilities.

In this context, to promote small and medium-sized banks to resolve existing risks, integrate resources to improve operating efficiency, reform and reorganization is an important direction, and regional bank mergers and reorganizations may accelerate.

  Rebirth, or reincarnation?

  In 2019, the China Banking and Insurance Regulatory Commission issued a "Notice on the On-site Inspection of Some Local Small and Medium-sized Bank Institutions", which sorted out the risk management issues of small and medium-sized banks and listed the imperfect corporate governance, irregular shareholder equity management, and comprehensive risks. Management and internal control requirements are not in place, handling credit business in violation of regulations, disposing of non-performing assets and off-balance sheet business, interbank business, wealth management business and other 8 risk issues.

  Sword refers to "severe ailments". In order to rectify the order of the industry, prevent and defuse risks, and promote financial support to better support the development of the real economy, relevant ministries and departments and local financial management departments have continued to make efforts to regulate small and medium-sized banking businesses and promote the improvement of corporate governance in recent years.

Promoting the reform and reorganization of small and medium banks has become an important direction.

Cao Yu, vice chairman of the China Banking and Insurance Regulatory Commission, publicly stated at a press conference of the State Council Information Office last year that “everyone will continue to see that the reform and reorganization of small and medium-sized banks will be more intense, especially for market-oriented reorganization. The China Banking and Insurance Regulatory Commission will implement differentiated regulatory policies for small and medium-sized banks to create favorable conditions for the reform and reorganization of small and medium-sized banks."

  At the same time, industry experts pointed out that banks that are not at risk will consider mergers. From the perspective of long-term development, some banks choose mergers and reorganizations to better respond to industry transformation and market competition.

  The reporter noticed that mergers and reorganizations between small and medium-sized banks did not occur in recent years.

Taking the city business behavior as an example, the Huishang Bank established in 2005 was reorganized by the merger of commercial banks in the five cities of Bengbu, Huaibei, Ma'anshan, Wuhu, and Anqing in Anhui Province by the former Hefei City Commercial Bank and seven other city credit cooperatives. .

Bank of Jiangsu was established in 2007 from the merger and reorganization of commercial banks in Wuxi, Suzhou, Nantong, Changzhou, Huaian, Xuzhou, Yangzhou, Zhenjiang, Yancheng, Lianyungang and other cities in Jiangsu Province.

In 2019, the assets of Bank of Jiangsu exceeded the 2 trillion yuan mark, second only to Bank of Beijing and Bank of Shanghai.

In the 14 years since its establishment, Bank of Jiangsu's assets have increased by nearly 12 times.

  "Small and medium-sized banks can better respond to market competition in mergers and reorganizations." Zeng Gang, deputy director of the National Finance and Development Laboratory, said that it is not banks that have operational risks that will consider mergers and reorganizations. Mergers and reorganizations are also the development strategies or strategic choices of some banks. It can optimize the allocation of financial resources and improve the ability to serve the real economy.

  In reality, there may also be cases of failed restructuring.

Wang Xin, director of the Research Bureau of the People’s Bank of China, pointed out that some local governments, in the absence of sufficient financial resources, in order to deal with risks, simplistically "combined" and engage in "lalange allocation", but it is easy to have negative effects and trigger other risks. .

  Be wary of the risk of "La Lang match"

  The merger and reorganization of small and medium-sized banks is not simply 1 plus 1 equal to 2. To re-optimize the allocation of resources and improve the efficiency of serving the real economy, small and medium banks need to practice their internal skills, first of all, to adapt to the new regulatory environment as soon as possible.

  Recently, the China Banking and Insurance Regulatory Commission announced the "Measures for the Regulatory Rating of Commercial Banks", which puts more emphasis on the role of qualitative factors such as corporate governance and data governance, and correspondingly reduces the weight of quantitative factors such as asset quality and profitability.

The resulting regulatory rating results are used as the main basis for regulatory agencies to measure commercial banks' operating conditions, risk management capabilities, and risk levels, and to conduct differentiated supervision.

According to analysis by Wu Rendi, an analyst in the financial business department of Oriental Jincheng, according to the new rating method, some banks in city commercial banks and rural commercial banks have certain regulatory pressures, and business expansion may be restricted.

  Since last year, under the influence of regulatory policy adjustments, the storage environment for small and medium banks has undergone great changes, and insufficient capital has become a common problem that plagues many small and medium banks.

Regulators encourage small and medium-sized banks to replenish capital through multiple channels.

Ye Yanfei, head of the Policy Research Bureau of the China Banking and Insurance Regulatory Commission, recently stated publicly that a very important aspect of the reform of small and medium banks is to replenish capital. Only after capital replenishment can they better support rural revitalization and support small and micro enterprises.

  Regarding the merger and reorganization of small and medium-sized banks led by local governments, the regulatory authorities also encourage them.

Wang Yifeng, chief analyst of the financial industry of Everbright Securities, believes that the “group warming” led by local governments will help to consolidate local responsibilities. By improving corporate governance, improving risk control systems, and re-optimizing the allocation of financial resources, it will help stabilize local finance. Supply capacity, in addition, through local capital injections, the stability of the banking system has also been improved.

  For example, in the merger and reorganization of Liaoshen Bank, special bonds of small and medium-sized banks played a very important role.

According to documents disclosed by the China Bond Information Network, Liaoning Province raised 10 billion yuan through the issuance of special bonds for small and medium banks. Liaoning Financial Holdings Group injected a newly established city commercial bank as capital. At the same time, Xincheng Commercial Bank absorbed and merged two banks. Later, the total assets reached 259.9 billion yuan.

  The Bank of Sichuan, which was established in November last year, also adopted a similar approach to new mergers.

The Bank of Sichuan was merged on the basis of Panzhihua City Commercial Bank and Liangshan Prefecture Commercial Bank.

The new bank has a registered capital of 30 billion yuan and introduced 28 investors, becoming the first provincial-level corporate city commercial bank in Sichuan Province.

  Experts reminded that in areas with insufficient financial resources, in promoting the merger and reorganization of small and medium-sized banks, it is necessary to avoid the small carts from dragging on, and not to engage in "lalang".

Wang Xin believes that "Lalang" may hit the local, small and sophisticated rural credit cooperatives, which is not conducive to the heavy focus of rural credit cooperatives and focus on "agriculture, rural areas" and small and micro financial services.

  From the perspective of the industry, although the merger and reorganization of small and medium-sized banks is showing an accelerated trend, it is necessary to adhere to the direction of marketization and rule of law, fully consider the wishes of all parties involved, and coordinate the distribution of interests among shareholders.

At the same time, continue to improve the corporate governance system and mechanism, and strengthen internal control risk management.

Only in this way can the effect of "heating" be realized.

  Our reporter Lu Min

Keywords: banks, reform, merger, anhui wangjiang rural commercial bank, liaoyang bank, china banking and insurance regulatory commission, reorganizations, mergers, governance, assets, warmth, reorganization, increase, liaoshen bank, bank of beijing