How to Solve the "Growing Troubles" of Private Banks

  Private banks are the "capillaries" of the existing financial system. They use financial technology to solve the problem of inclusive benefits through differentiated development and characteristic operations.

At present, my country's private banks have not only begun to take shape in number, but have also formed their own unique business models and development experience that can be used for reference, effectively making up for the shortcomings of small and micro financial services and stimulating the vitality of the financial market.

After more than seven years of development, what difficulties are faced by growing private banks?

Where are private banks heading?

  It takes three days for the trial jade to burn, and it takes seven years to distinguish the material.

Since the opening of my country's first private bank in December 2014, this "new force" in the banking industry has gone through more than seven years of exploration.

Compared with traditional banks, what is special about private banks?

What "growing pains" did you encounter in your development?

Following the growth trajectory of private banks, a reporter from Economic Daily launched an investigation.

  Birth: Greater efforts to open up to the outside world

  Although it has been piloted for more than seven years, many people do not know much about private banks.

Some people have doubts: Why should there be state-owned banks to set up private banks?

Is it safe to put money in a private bank?

In fact, the establishment of private banks is an important measure for my country's financial industry to increase its "internal opening up".

  Since the early days of reform and opening up, my country has promoted private capital investment and equity participation in the banking industry in an orderly manner.

In 1984, the Third Plenary Session of the Twelfth Central Committee of the Communist Party of China passed the "Decision of the Central Committee of the Communist Party of China on the Reform of the Economic System", which proposed to further implement the policy of revitalizing the economy internally and opening up to the outside world.

In 1988, a "financial service agency" with only 5% of the shares held by the government and 95% of the shares held by personal capital was born in Zhejiang. It was the predecessor of Taizhou Commercial Bank, which shocked people at that time.

However, since it is not 100% privately funded, this institution is not a private bank in the true sense.

  With the continuous expansion of opening up, the pace of private capital entering the banking industry has accelerated significantly, with more channels, more institutions, more capital, and an increase in proportion.

Shang Fulin, the then former chairman of the China Banking Regulatory Commission, made it clear in April 2014 that there are no legal obstacles and no discriminatory regulations for private capital to enter the banking industry.

  Before the pilot of private banks, there were four modes of private capital entering the banking industry in my country: initiation, subscription of new shares, transfer of equity, mergers and acquisitions.

For example, private capital participates in the restructuring and restructuring of urban commercial banks, rural credit cooperatives and other institutions to resolve existing financial risks; another example is private capital investing in existing commercial banks, promoting mixed ownership reform in accordance with the law, and sharing the achievements of banking reform and development.

  On the basis of many useful explorations, the pilot work of private banks has become more and more "sure". In 2013, two important documents from the Party Central Committee and the State Council officially kicked off the establishment of private banks.

In order to further expand the domestic opening up, in July 2013, the "Guiding Opinions of the General Office of the State Council on Financial Support for Economic Structural Adjustment and Transformation and Upgrading" proposed "trying to establish a private bank initiated by private capital at its own risk"; in November of the same year, The Third Plenary Session of the 18th Central Committee of the Communist Party of China "Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening the Reform" proposed that "under the premise of strengthening supervision, qualified private capital shall be allowed to initiate the establishment of small and medium-sized banks and other financial institutions in accordance with the law".

  So far, the real private banks have appeared.

Compared with historically those banks whose shares are held by private capital, all the shareholders of the pilot private banks are Chinese-funded private enterprises, and all their capital comes from private capital.

  The determination to open up demonstrated by the pilot has further stimulated the enthusiasm of the people, and private enterprises and local governments have actively reported the pilot program.

how to choose?

The regulatory authorities decided to adhere to the "three respects": first, respect the spirit of private initiative and government recommendations, second, respect the independent will of the initiators, and third, respect the principle of market choice.

  In the end, after repeated demonstrations and selection of the best, the first batch of pilot programs for five private banks were determined. They are: Shenzhen Qianhai WeBank, Wenzhou Minshang Bank, Tianjin Jincheng Bank, Shanghai Huarui Bank and Zhejiang Internet Commercial Bank.

 Pathfinder: Identify the positioning of Pratt & Whitney

  On January 4, 2015, Premier Li Keqiang hit the enter key on the computer at WeBank, and truck driver Xu Jun received a loan of 35,000 yuan.

  As the first Internet private bank to open in China, this is the first loan business completed by WeBank.

At that time, people were very curious about the "pure Internet bank": there is neither a business outlet nor a business counter, and no property guarantee is required. Is it possible to issue loans through face recognition technology and big data credit rating?

  One small step for WeBank, one giant leap for financial reform.

When Premier Li Keqiang inspected WeBank, he said that you should blaze a trail in the field of Internet finance and provide experience for the development of inclusive finance, small loan companies and small and micro banks.

To reduce costs and benefit small and micro customers, this can also force traditional financial reforms to accelerate.

  In addition to WeBank, the other 4 private banks in the first batch of pilots are also thinking about how to locate them.

"Compared with large state-owned banks and joint-stock banks, our brand awareness is not high, the customer base is weak, the ability to absorb deposits is insufficient, and the talent advantage is not obvious. Who are we going to serve? How to play the card of characteristic management?" In the early days, the heads of many private banks expressed such sentiments.

  Who do you serve?

Serving "small and micro enterprises", "agriculture, rural areas and farmers" and communities in small and micro enterprises, and being the "capillaries" of my country's existing financial system.

This is not only the positioning of private banks by the regulatory authorities, but also the feasible way that private banks have explored in practice.

  "The development of private banks is to use their natural characteristics of being from the private sector, familiar with private enterprises, and close to the people, to supplement the deficiencies of banks in serving small and micro enterprises, and then gradually improve the ability of financial services to serve the real economy." Shang Fulin said, at the same time, this also helps In order to introduce more competition mechanism, promote the banking industry to consciously improve service quality.

  The first batch of five private banks did not "go ahead" and expand their scale blindly, but prudently explored ways to find a distinctive and differentiated business model to improve their matching with the financial needs of market segments.

For example, WeBank focuses on serving small and micro enterprises and individual consumers, and Wenzhou Minshang Bank is positioned to serve small and micro enterprises, individual industrial and commercial households, community residents, and county-level “agriculture, rural areas and farmers” in the Wenzhou area; Tianjin Jincheng Bank is deeply engaged in small and medium-sized enterprises in Tianjin area. microenterprises.

  The first batch of pilot projects is safe and effective, and subsequent approval is possible.

After the pilot project in 2014 and the improvement of the system in 2015, since 2016, the approval of private banks in my country has become "normalized". The regulatory authorities have approved the establishment of 12 private banks in 2016 in accordance with the principle of "one mature, one established". , in 2017 and 2018, it was not approved for construction, and in 2019, it was approved to build two.

  Up to now, my country has opened a total of 19 private banks.

From the perspective of regional distribution, Guangdong, Zhejiang and Jiangsu with developed private economy each have two, and Fujian, Anhui, Hubei, Shandong, Hunan, Sichuan, Jiangxi, Liaoning, Jilin and four municipalities each have one.

  "The differentiated operation characteristics of private banks are relatively obvious, and they can be roughly divided into three modes." said Dong Ximiao, chief researcher of China Merchants Union Finance. Banks; the second is quasi-Internet type, such as Shanghai Huarui Bank, Wuhan Zhongbang Bank, Jiangsu Suning Bank, etc.; the third is relatively traditional type, such as Tianjin Jincheng Bank, Wenzhou Minshang Bank, etc.

  After years of exploration, private banks have handed over a dazzling transcript of inclusive finance.

As of the end of December 2020, the balance of small and micro loans of private banks reached 191.99 billion yuan, an increase of 127% from the beginning of the year; the balance of personal business loans reached 150.155 billion yuan, an increase of 117.6% from the beginning of the year.

 Innovation: Seizing the Fintech Opportunity

  It is not a smooth road for private banks to explore inclusive finance.

"Serving small and micro companies, if we follow the traditional tactics of loan officers, we can't compete with the big state-owned banks, and the big banks in turn say that we are 'luziye'." When it comes to business expansion, the person in charge of a private bank in a central province is a little helpless. He said that private banks had three prominent disadvantages in the initial stage.

First, the customer base is weak and the brand awareness is low. How to accurately find small and micro enterprises?

Second, the capital price is high and the operating cost is high. How to reduce the cost and then reduce the loan interest rate?

Third, there are few service carriers, and some private banks do not even have offline outlets. How to improve the service experience of small and micro enterprises?

  The key to breaking the situation is to strengthen independent innovation in technology and seize the opportunities of the era of financial technology.

"The integration of finance and technology is the general trend." Cao Yu, vice chairman of the China Banking and Insurance Regulatory Commission, said that technological means have three major boosts, one is to greatly enrich the adequacy of bank information acquisition, the second is to enhance the scientific nature of bank risk judgment, and the third is to improve bank loans. Review the timeliness of approval, and on this basis, further expand the coverage of financial services and significantly improve the effectiveness of financial supply.

  When it comes to seizing the opportunities of the times, there is one iconic exploration that cannot be skipped.

The first distributed banking core system with completely independent intellectual property rights in China was born in WeBank, a private bank.

  Aside from the disadvantages, the private banks in the early stage also have obvious advantages, namely: "a blank piece of paper" and "the boat is small and easy to turn around".

Therefore, "doing things that are different from traditional banks and innovating things that traditional banks can't do" has become the spiritual force supporting private banks to explore the way.

  In the face of opportunities, people who are thoughtful and predictable are always easy to hit it off.

In March 2014, WeBank was in the preparatory period and had not yet opened. Gu Min, Chairman of WeBank, happened to meet Ma Zhitao, an old colleague, a "veteran" with ten years of IT experience in traditional financial institutions. Cooperation was launched.

  In the banking industry at that time, "de-IOE" was a hot topic and was highly valued by the regulators.

IOE refers to the back-end architecture of large financial institutions at that time, which can be divided into three parts: minicomputer, database, and high-end storage, and the leading manufacturers of these three parts are IBM (International Business Machines), Oracle (Oracle) and EMC (Essential). ), so the system is referred to as the IOE system for short.

  Why "Go to IOE"?

First, the IOE system is a "centralized" architecture, which is costly.

If the bank needs to expand, it has to replace the computing hardware with larger capacity, which is like adding water to a cup, and once the water is almost full, it must be replaced with a larger cup.

Second, the IOE system is a "closed-source" commercial system, and the source code of all basic software other than its application programs is usually not disclosed. Banks rely too much on core manufacturers, which is easy to bury potential security risks.

  WeBank hopes not to rely on IOE, but to do the opposite, to be a bank back-end system with independent intellectual property rights, "distributed" architecture, and "open source", which can not only greatly reduce operating costs, but also greatly increase data readability. take ability.

Because the "distributed" architecture uses "small water cups" with standard capacity and low price, after the water is full, there is no need to replace a larger and more expensive cup, just add a low-priced small water cup. Can.

  The seeds of innovation are already bearing fruit.

At present, the system has completely independent intellectual property rights and can support hundreds of millions of customers and high-concurrency transactions. Since its launch, it has achieved “24×365” uninterrupted operation, serving more than 300 million customers, and a single-day peak of more than 770 million transactions. At the same time, the operation and maintenance cost of each account is reduced to 2.2 yuan, which is less than one-tenth of that of domestic and foreign peers.

  "In the early days of establishment, we concentrated our resources and carried out research on key core technologies." Li Nanqing, secretary of the party committee and president of WeBank, recalled that, unlike most banks, the bank's scientific and technological personnel accounted for more than 50%, and scientific and technological research and development over the years Expenses account for more than 10% of operating income.

  Once the back-end system is stable, financial technology can be used in more businesses.

"We use cutting-edge technology in finding customers, risk control, and improving services." Li Nanqing said that thanks to the comprehensive application of technology, WeBank's various costs have been continuously optimized and efficiency has been significantly improved. Inclusive financial services laid a solid foundation.

  The innovative exploration of WeBank has played a positive exemplary role.

Since 2017, attaching importance to IT system construction and seizing technological trends have become the choice of many private banks. Some banks have also achieved external technology export based on the successful introduction of technology.

  Challenge: crack the development puzzle

  Not all private banks are as "dare to venture" and "dare to try and make mistakes" like WeBank.

The reporter's investigation found that, as shareholders of private banks, many private capital could not accept the high losses of trial and error.

  This returns to the original point of the question: what is the original intention of private capital to initiate the establishment of private banks?

If it is to make quick money, and even use private banks as a channel for their own interests, this is obviously not feasible or feasible.

  "There is often a misunderstanding in running a bank with private capital, thinking that it is the same as running a general enterprise, and it can facilitate financing." At the beginning of the pilot program of private banks, Li Yang, chairman of the National Finance and Development Laboratory, reminded that the banking industry is special The industry, which is a franchise in any country, must be subject to strict qualification review and supervision.

  To protect the public interest, there must be iron laws and regulations.

When selecting the first batch of pilot private banks, the regulatory authorities set "five access rules".

First, there must be institutional arrangements for self-responsibility of residual risks; second, there must be good qualifications and anti-risk capabilities for running banks; third, there must be the terms of the agreement for shareholders to accept supervision; fourth, there must be differentiated market positioning and specific strategies; fifth, there must be A legally feasible "risk treatment and recovery plan".

  Subsequently, the "Guiding Opinions on Promoting the Development of Private Banks" and "Guiding Opinions on the Supervision of Private Banks" were successively issued, and private banks gradually embarked on the road of legal and compliant operation and scientific and steady development.

  However, laws and regulations cannot predict all risks. At present, special attention should be paid to the risks of related party transactions.

Recently, Shanghai Huarui Bank, Liaoning Zhenxing Bank, Chongqing Fumin Bank and many other private banks have received fines from regulatory authorities, all of which involve the transfer of benefits to related parties.

  "We must pay special attention to the fact that private banks must not become banks controlled by a small number of private capital and capital, and cannot turn banks into their own ATMs for related transactions." Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, once said in March 2017 Emphasize.

  A warning was made in 2017, why can't this problem be eradicated so far?

The reporter's investigation found that the main reason for the related party transactions is that the corporate governance of private banks is defective, but it is not a day's work to improve corporate governance.

A modern financial institution must have a complete corporate governance organizational structure, that is, the general meeting of shareholders, the board of directors, the board of supervisors and the senior management as the main body, and the "three committees and one layer" each perform their own duties, effectively check and balance, and coordinate operations.

In contrast to individual private banks, some main sponsors, especially the largest shareholder, are strong and overly involved in the operation and management of private banks; some shareholders transfer their equity immediately after the bank is approved, changing the attributes of private enterprises; some shareholders face judicial disputes, There is a hidden danger of compulsory auction execution of bank equity.

  Problems in development must be solved in development.

Private banks are new, most of their shareholders come from real enterprises, and business operations pay more attention to input-output, profit returns and other aspects.

Dong Ximiao said that next, it is recommended to attract and encourage private enterprises with strength, willingness and long-term investment in the development of private banks to participate in private banks, and reduce the demands of corporate shareholders for "quick success and instant profit"; Professional things are left to professional people.

  In addition to acquired defects, private banks still have many congenital deficiencies, and some development difficulties have not been alleviated so far, and the regulatory authorities should pay attention to this.

  "Due to the lack of physical outlets and stricter supervision of Internet deposits, it is becoming more and more difficult for some private banks to absorb deposits, and the cost of debt is much higher than that of other banks." The relevant person in charge of the China Banking Association said that as of the end of December 2020, there were 10 The online deposits of a private bank mainly come from third-party Internet platforms, and the dependence rate is as high as 81%.

  In addition, private banks are generally faced with the dilemma of capital replenishment, especially the lack of capital replenishment tools.

The above-mentioned person in charge stated that if financial bonds and secondary capital bonds are issued, most private banks currently fail to meet the regulatory indicators.

  Difficulty in absorbing deposits and replenishing capital directly restrict the ability of private banks to issue loans and hinder the sustainability of private banks in practicing inclusive finance.

  How to solve?

"In order to alleviate the problem of a single source of debt for private banks, it is recommended to revise the current relevant measures to facilitate private banks to enter the interbank lending market as soon as possible to carry out liquidity management and obtain funding sources through the issuance of financial bonds." Dong Ximiao said, for example, to approve private banks to join the national interbank market The inter-bank lending market supports the issuance of inter-bank certificates of deposit, and grants pre-declaration and approval for the issuance of inter-bank certificates of deposit.

  In response to the issue of capital replenishment, Dong Ximiao suggested that relevant regulations should be appropriately revised to encourage private banks to replenish capital by issuing capital replenishment bonds.

At present, only Zhejiang MYbank has successfully issued perpetual bonds, and in the future, more private banks can be included in the target banks of perpetual bond issuance.

In addition, private banks with better operating conditions may be allowed to take the lead and go public on the basis of the pilot.

"By listing at home and abroad, it can not only allow private banks to replenish capital in a timely manner, but also allow the public to share the development results of high-quality private banks."

  Guo Ziyuan