Press briefing on China's economic development in 70 years

0 Comment(s)Print E-mail, September 25, 2019
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Financial Times:

My question goes to Mr. Yi. Over 30 banks did not publish their 2018 annual report on time and three of them have received assistance from related departments. Are more banks in need of assistance? What measures will the central bank take to deal with the problem?

Yi Gang:

You mentioned that several city commercial banks in China, some of whom are listed companies, have delayed releasing their annual reports for last year and have faced some risks. As you know, we are now in the second year of fighting the critical battle of guarding against and defusing financial risks. This second year is slated to be a tough year when many difficulties  are to be overcome and financial risks to be defused. Several small and medium-sized banks have released their overdue reports and adopted different ways to defuse the risks. The People's Bank of China and the China Banking and Insurance Regulatory Commission (CBIRC) have taken over Baoshang Bank in May in accordance with related laws. After the takeover, the legitimate rights of over 5 million depositors, over 200,000 clients who have invested in various financial products, as well as a majority of corporate business depositors are guaranteed. The bank is now operating smoothly, and clients can make deposit or withdrawals as usual.

Other banks like the Bank of Jinzhou, according to media reports, have found strategic investors who will help it defuse risks using a market-oriented approach. Some county-level rural credit cooperatives, rural commercial banks and rural cooperative banks are also actively increasing investment and shifting their business model to serving local communities. In the last few years, some local banks have engaged in over expansion into other regions and even other provinces. As a result, their business focus has been diverted to other regions or high-risk projects. While defusing risks, we are asking small and medium-sized financial institutions to focus on serving the real economy, private companies, and small businesses in the local area so as to ensure sustainable and risk-free operations.

The general principle is that we need to defuse these risks through market-oriented measures that are in accordance with the law. What does this mean? First, financial institutions should assume their due responsibilities, and shareholders should be held responsible. At the same time, the main creditors should have the capacity to identify risks, while the local governments, regulators and the People's Bank of China should also perform their duties in defusing risks. According to market- and law-based measures, shareholders and the institutions have their clear respective responsibilities. During the process, we should pay special attention to protecting the rights of common depositors and investors.

Based on the current situation, the overall risks are decreasing, people's confidence is gradually increasing, and the interbank premium risks are on the decline. If this trend continues, I think the banking sector will see smaller risks, and this will evolve into a mode of development where the shareholders take the primary responsibility and the banks serve primarily to the local market, the real economy and small businesses. Thank you.

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