On November 23, the CIRC issued an official reply on the bankruptcy of the contractor Bank Co., Ltd. According to the announcement, the request for instructions on bankruptcy application matters of the contractor Bank Co., Ltd. has been received, and after study, it has been agreed in principle that the contractor bank shall enter into bankruptcy proceedings. The subcontractor bank shall carry out follow-up work in strict accordance with relevant laws and regulations, and timely report to the CBRC in case of any major situation.
Generally speaking, Chinas financial system operates steadily, but in recent years, China has been constantly improving the disposal mechanism of high-risk financial institutions, exploring the establishment of a market-oriented exit mechanism for financial institutions, and improving the deposit insurance system is the key to ensure the stable operation of the whole banking system while individual banks are cleared. In order to protect the legitimate rights and interests of depositors and promote the healthy development of the banking industry, the central bank recently issued a notice authorizing financial institutions participating in deposit insurance to use the deposit insurance logo from November 28 to further improve the deposit insurance system.
Early notice of bankruptcy application
The announcement of the CIRC did not exceed expectations, which is only an inevitable step in the bankruptcy proceedings of the contractor bank. In the second quarter of 2020 monetary policy implementation report (hereinafter referred to as the report) previously issued by the central bank, it is clearly mentioned that the contractor bank will be filed for bankruptcy according to the results of assets and capital verification of the early serious insolvency of the contractor bank.
The write down of capital supplement tools also reflects the insolvency of the contractor. On November 13, Baoshang bank announced on China money. Com that it planned to write down the principal of the issued 6.5 billion yuan of 2015 Baoxing secondary bonds on November 13, and no longer pay any unpaid cumulative interest payable of about 586 million yuan.
This is the first write down in the history of secondary capital bonds issued by domestic banks. According to the announcement, the reason for the write down is that according to the measures for capital management of commercial banks (for Trial Implementation) and other provisions, the peoples Bank of China and the China Banking and Insurance Regulatory Commission (CIRC) have determined that the non survival trigger event occurred in the subcontractor bank
Before that, Zhou Xuedong, head of the takeover group of the subcontractor bank, disclosed in an article in China finance that since 2005, the group has been gradually hollowed out through a large number of improper related party transactions, capital guarantee and fund occupation, which directly infringes on the interests of other shareholders and depositors. According to the results of assets and capital verification, in the 15 years from 2005 to 2019, tomorrow Department registered 209 shell companies and obtained credit funds in the form of 347 loans. The amount of funds occupied reached 156 billion yuan, and all of them became non-performing loans. The severity of insolvency was beyond imagination.
Fully protect the rights and interests of depositors before bankruptcy
From May 2019 when the Baoshang bank was taken over according to law, to the end of April 2020, mengshang bank was officially established and opened. The assets and liabilities related to Baoshang bank were transferred to mengshang bank and Huishang bank respectively, and then to the recently filed bankruptcy application of Baoshang bank. For nearly 18 months, the risk mitigation and disposal work of Baoshang bank has been carried out steadily and orderly, among which, the deposit insurance system has played an important role Important role.
When a bank is taken over and disposed of, the most concerned issue of the outside world is how to protect the rights and interests of depositors. From the risk disposal process of the subcontractor bank, the rights and interests of depositors, especially the funds of individual depositors and small and medium-sized enterprises, have been fully protected. According to the report, in order to protect the legitimate rights and interests of depositors creditors to the greatest extent and maintain financial and social stability, the central bank and the China Banking and Insurance Regulatory Commission have decided to provide funds from the deposit insurance fund and the central bank, so as to provide full protection for personal deposits and most institutional claims. At the same time, in order to strengthen the market discipline, gradually break the rigid cashing, and take into account the affordability of market entities, it has provided an average of 90% guarantee for the creditors rights of large institutions.
Zhou Xuedong also said that the takeover group fully exercised the operation and management rights of the subcontractor bank, and entrusted CCB to trust the business of the subcontractor bank. After taking over, the takeover group disposed of financial risks in accordance with laws and regulations, and gave full protection to depositors, personal financial customers, small and medium-sized enterprises and other creditors. The takeover has strengthened market discipline and promoted credit stratification in financial markets.
Improve the deposit insurance system and improve the risk early detection mechanism
At present, 146 countries and regions in the world have established deposit insurance system. Deposit insurance system is not only conducive to strengthen the protection of depositors, but also plays a role in promoting early detection and less occurrence of risks. A person close to the regulatory authorities told reporters that Chinas deposit insurance regulations clearly stipulates that deposit insurance fund management institutions have the function of early correction. Since 2017, deposit insurance has explored and carried out early correction in accordance with the law
First, strengthen risk monitoring, identify major risks in a timely manner and find out the risk base. Deposit insurance strengthens risk monitoring by means of rating, verification and evaluation, verifies the authenticity of main indicators and potential risks of insurance institutions, implements list management for individual insurance institutions with prominent risks, and strengthens tracking and monitoring.
The second is to compact the risk management responsibility of high-risk institutions and strengthen the constraints on institutions and shareholders. For a small number of institutions with insufficient capital, deposit insurance timely issues early correction notices, compacts the responsibilities of institutions and their shareholders, requires the formulation of capital replenishment plan, and resolves risks by increasing profit retention, limiting salary and introducing strategic investors. At the same time, according to the specific risk problems, we should promote the organization to adjust senior management, improve corporate governance and risk management, and realize prudent operation.
Third, timely report risks, promote the formation of joint forces, and jointly resolve risks. Deposit insurance timely reports the major risk problems found in risk monitoring to the local government and regulatory authorities, studies and puts forward clear suggestions on risk mitigation, forms joint efforts with all parties to take measures to effectively improve the risk.
The risk resolution of the subcontractor bank provides rich experience for China to explore the disposal of high-risk financial institutions. Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, recently wrote that it is necessary to establish an efficient risk handling mechanism for problem institutions. When financial institutions perform the main responsibility, shareholders, especially major shareholders, should bear important responsibilities. The local Party committee and government should closely combine the leadership responsibility of the local party, the management responsibility of local state-owned financial capital, the risk management responsibility of the jurisdiction and the responsibility of maintaining social stability. The financial management department shall perform the responsibility of supervision subject. We will improve the deposit insurance system and institutional system, and give full play to the role of early intervention, early warning and early disposal.