Prevent systemic financial risks and add additional supervision to systemically important banks
Daily regulatory requirements, additional capital and leverage ratio requirements
□ Our reporter Zhou Fenmian
To guard against systemic financial risks and prevent and resolve major risks, as one of the country’s three tough battles, the first is to prevent systemically important financial institutions from risking risks.
In China, the responsibility for 80% of social financing is borne by banking financial institutions. Therefore, strengthening the supervision of systemically important banks has become the primary task of preventing financial risks.
After the People’s Bank of China and the China Banking and Insurance Regulatory Commission issued the “Measures for the Evaluation of Systemically Important Banks” (hereinafter referred to as the “Evaluation Measures”), the two departments have recently jointly issued the “Additional Supervision Regulations for Systemically Important Banks (Trial)” (hereinafter referred to as “Additional Supervision”). Regulations), and put forward further regulatory requirements for commercial banks included in the list of systemically important banks.
The regulatory framework is established
Strengthening the supervision of systemically important financial institutions has become the consensus of many countries since the 2008 financial crisis.
According to a strong introduction from a professor at the School of Economics and Law of Northwest University of Political Science and Law, one of the main topics of the first G20 summit held in Washington, USA in October 2008 was the discussion of dealing with financial risks and financial crises.
At the 2009 summit, the Financial Stability Board was established.
The G20 summit meets at least once a year.
Since 2011, the Financial Stability Board has released a list of global systemically important banks every year, and has formed a relatively clear regulatory policy framework.
There are about 30 banks included in this list, which are updated every year. Initially, only Bank of China was included in the global systemically important bank. Currently, the four major banks, Industrial and Commercial Bank of China, Bank of China, Construction Bank, and Agricultural Bank, are on this list.
According to the framework guidelines issued by the Basel Committee on Banking Supervision, countries have also established a domestic systemically important banking regulatory policy framework based on their actual conditions, which mainly include evaluation methods and additional regulatory requirements.
China made it clear at the Fifth National Financial Work Conference in 2017 that the People's Bank of China will take the lead in formulating the basic rules of systemically important financial institutions, and take the lead in organizing the formulation and implementation of recovery and disposal plans for systemically important financial institutions.
In November 2018, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission jointly issued the “Guiding Opinions on Improving the Supervision of Systemically Important Financial Institutions”, which clarified the assessment, identification and addition of systemically important financial institutions in China’s banking, insurance, and securities industries. The overall policy framework for supervision and recovery disposal.
Appraisal of 19 banks
Liu Shaojun, vice president of the Banking Law Research Institute of the Chinese Law Society, said that in China's social financing, bank loans as indirect financing account for 80% of social financing, which is completely different from the high proportion of direct financing in the United States and other countries.
In these countries, by seizing the risk prevention of securities financial institutions with direct financing, we can prevent the occurrence of systemic financial risks; in China, we must seize The highest, the most prone to risk.
To this end, the People's Bank of China and the China Banking Regulatory Commission took the lead in starting with systemically important banks.
In December 2020, the above-mentioned two departments issued the "Evaluation Measures", which clarified the evaluation method, evaluation scope, evaluation process and work division of China's systemically important banks, and established the four dimensions from the four dimensions of scale, relevance, substitutability and complexity The evaluation index system of China's systemically important banks.
Recently, the two departments jointly issued the "Additional Supervision Regulations."
Liu Shaojun said that the securities industry and the insurance industry have not yet seen similar regulations.
The "Assessment Method" clearly states that systemically important banks are evaluated on the basis of four indicators of scale, relevance, substitutability, and complexity, with a weight of 25% for each category.
Liu Xiaoyu, senior partner of the Bank of China Law Firm, said that global systemically important banks have one more "cross-border business" indicator than domestic systemically important banks, each with a weight of 20%.
Both global systemically important banks and domestic systemically important banks are divided into 5 groups according to the evaluation criteria.
The evaluation sample of domestic systemically important banks is the top 30 banks in the country, and those with a score of 100 or more are selected into the list of domestic systemically important banks.
Recently, the People’s Bank of China and the China Banking and Insurance Regulatory Commission have assessed and identified the first batch of 19 domestic systemically important banks based on 2020 data, including 6 state-owned commercial banks, 9 joint-stock commercial banks and 4 city commercial banks.
According to the scores from low to high, they are divided into 5 groups: the first group of 8 companies, including Ping An Bank, China Everbright Bank, Hua Xia Bank, China Guangfa Bank, Bank of Ningbo, Bank of Shanghai, Bank of Jiangsu, and Bank of Beijing; the second group of 4 companies, including Shanghai Pudong Development Bank, China CITIC Bank, China Minsheng Bank, China Postal Savings Bank; the third group of 3 companies, including Bank of Communications, China Merchants Bank, Industrial Bank; the fourth group of 4 companies, including the Industrial and Commercial Bank of China, Bank of China, China Construction Bank, China Agricultural Bank; No banks have entered the fifth group.
In the future, according to the changes in the evaluation indicators such as the business scale and relevance of each commercial bank, the list and grouping of the systemically important banks will also change.
Additional capital requirements
Liu Xiaoyu believes that the "Additional Supervision Regulations" are the implementation of differentiated regulatory requirements for the three departments issued guidance, and at the same time it is a refinement of the "Assessment Measures", emphasizing that as a systemically important bank, in addition to meeting the daily regulatory requirements of the regulatory authorities In addition, there are also some additional regulatory requirements, which are concentrated in terms of additional capital and additional leverage.
According to the "Additional Supervision Regulations", systemically important banks should meet certain additional capital requirements on the basis of meeting minimum capital requirements, reserve capital and countercyclical capital requirements, which are met by core Tier 1 capital.
From the first group to the fifth group of banks, additional capital requirements of 0.25%, 0.5%, 0.75%, 1% and 1.5% apply respectively.
When the score changes cause the grouping to change, the new additional capital requirements should be adapted, and those who withdraw from the list of systemically important banks are no longer required.
The "Additional Supervision Regulations" require that systemically important banks should have sufficient capital and debt instruments, establish an internal capital restraint mechanism, improve the endogenous accumulation of capital, meet additional capital requirements, and be able to deal with possible losses and risks.
Another additional regulatory requirement is the requirement for additional leverage.
Systemically important banks are required to meet additional leverage ratio requirements on the basis of meeting leverage ratio requirements.
The additional leverage requirement is 50% of the additional capital requirement of systemically important banks.
Strongly speaking, in this way, the additional capital required for the additional leverage ratio, from the first group to the fifth group, applies 0.125%, 0.25%, 0.375%, 0.5%, and 0.75%, respectively.
The two departments can adjust the additional leverage requirements of systemically important banks in accordance with the macroeconomic situation, etc., and report to the Financial Stability Committee of the State Council for approval before implementation.
Strongly believe that the additional requirements of additional supervision are, in the final analysis, to make systemically important banks not to fail and not to die, requiring systemically important banks to meet higher regulatory standards on the basis of implementing various micro-prudential regulatory requirements. Improve its anti-risk ability.
In Liu Shaojun's view, it is worthy of recognition that the "Additional Supervision Regulations" make it clear that the board of directors bears the ultimate responsibility for related work, rather than the shareholders meeting.
"The demands of shareholders and the goals of the board of directors are sometimes inconsistent. The ultimate responsibility of the board of directors can ensure that the interests of commercial banks are maximized. This has been clarified in the commercial banking law that is being revised. The "Additional Supervision Regulations" stipulate this in a scientific way. advanced."
According to the "Additional Supervision Regulations", the responsibilities of the board of directors include being responsible for promoting systemically important banks to meet additional supervisory requirements and assuming the ultimate responsibility; formulating effective capital plans, establishing internal capital restraint mechanisms, regularly reviewing and evaluating the implementation of capital plans, and ensuring capital Levels continue to meet regulatory requirements; responsible for reviewing and approving recovery plans and disposal plan proposals, and assuming ultimate responsibility for the formulation and updating of recovery plans and disposal plan proposals, etc., are all based on the long-term plan for the development of commercial banks.