Small and Medium Bank Bankruptcies Possible
I had to pull up the cached version of this article because it no longer comes up on iFeng’s site. The headline reads: Dongbei Securities: Banking Industry in Crisis, These Banks Could Go Bankrupt. The full version is below in case the link stops working.
iFeng: 东北宏观：银行业危险了 这些银行将会破产
There is also a the same story at JRJ.com, currently working: 东北宏观：银行业危险了 这些银行将会破产
The report is an interview with Liu Chengran:
Shanghai Legal Information Financial Services Limited partner, vice president of Financial Supervision Research Institute. He has worked in the People’s Bank of China, the banking supervision system, has up to 15 years of experience in supervision, focusing on banking regulatory statistics and legal compliance research, participated in various types of bank good standards and regulatory statistical inspection more than 30 times.
Q1: What additional regulatory documents should we pay attention to during the year?
Liu: may introduce a series of regulatory documents, we believe that the core of the management of credit management methods, off-balance sheet business management regulations, financial management approach (guidance has been released first, this approach is already waiting for the introduction of new financial management in the same The new regulations on the floor to come out), the rest is the central bank to lead the management of the guidance, regulate the financial industry Document No. 127 will be revised version of the text. Promote the class of documents, one is the Trust Company Ordinance, one is the commercial bank bankruptcy regulations should pay attention.
Q2: Will banks go bankrupt?
Liu: In the past we think that the probability of bankruptcy is small, but the deposit insurance after three years of efforts, allowing small banks to bankruptcy (the largest risk is agricultural banks), the possible outbreak of regional financial risks, do not rule out this phenomenon. The next three to five years the probability of bankruptcy of commercial banks is very large, in fact, there are already micro-bankruptcy, such as the use of absorption merger.
Discussing why WMP have such high yields, but shouldn’t, Liu says it is a risk and maturity mismatch:
If there is no active management of the bank capacity, it will not have a high yield, so theoretically financial management should not have a high yield. But why is there now? Because the docking non-standard, which became a financial deposit, become just against, because the bank to eat poor, do not want to give excess returns, it is not the same as the public offering of funds as the nature of the commission. But the docking of non-standard will be mismatched, including the mismatch of the period, the risk of mismatch, and the bank on the “off-balance sheet” did not mention the risk of provision, that is, the ability to take risks.
Q4: 30 trillion in WMP will go where? Just do not grow or shrink? Will it be old and new? What kind of model will the future WMP use?
Liu: WMPs will shrink. Old and new cut is there, but will give the rectification period, not always indefinitely old and new cut off, but it will not suddenly back, otherwise the capital gap is difficult to make up, will slowly back to the table, such as matured do not renew, and then slowly back, so be sure to shrink.
The future of bank finance is likely to fund, such as the formation of financial subsidiaries in the form of strict information disclosure, to net worth, the buyer at their own risk.
Q6: Does the central bank and the CBRC agree? Before the 19th NPC Why do not you want to do so before dragging it? Is there a target for deleveraging?
Liu: now do not check will lead to 19th after the more unstable, because it can not drag down. There is no quantitative indicators, now is the risk of exposure, lack of capital to supplement the capital. The central bank’s perspective is to ensure that every quarter end there is not a big liquidity risk, the central bank will not consider bond risk too much. Now is to do stress tests, the banking system can return to the loan.
And the final question:
Q7: Which banks are relatively more dangerous and more safe?
Liu: state-owned big line is relatively more secure, because the operation has been relatively stable, the business is relatively more standardized, and large but not down. In addition, the big banks have begun to clean up and rectify, especially the underlying assets of the screening. Small and medium-sized banks, especially the risk of agricultural firms, do not rule out the phenomenon of individual bankruptcy.