21st Century Business Herald:
Among the nine key areas that the CBIRC will work on to guard against and defuse financial risks mentioned by Mr. Huang earlier, the first is to properly deal with high-risk financial institutions. How do regulatory bodies view the risks in small and medium-sized banks as well as insurance institutions? What are the measures taken in this regard? Also, Mr. Huang mentioned that strict measures will be undertaken to investigate and deal with financial groups that have been established in violation of prevailing laws and regulations. How do the authorities identify these financial groups and what are the measures that are in place to deal with them?
Huang Hong:
Thank you for your two questions. Let's give the floor to Mr. Xiao.
Xiao Yuanqi:
Thank you. Establishing risk monitoring for the banking and insurance sectors is one of the main responsibilities of the CBIRC. Mr. Huang, Mr. Zhu and Mr. Ma are all experts in this field.
Regarding your first question on how regulatory bodies view risks in high-risk financial institutions, generally speaking, risks in banks and insurance institutions are manageable on the whole. The indicators, either on these institutions' performance, or of the risk regulation, have remained within an appropriate range. According to a series of data points we released recently, the operations, performance, as well as core indicators of risk regulation toward commercial banks and insurance institutions have stayed promising. Nevertheless, there are indeed some small and medium-sized institutions facing comparatively high risks, and some of these risks are emerging due to various reasons. In regard to these problems, the CBIRC has remained vigilant and investigated the institutions concerned, managing them through a list system and defusing the risks accordingly. In many cases, this has been achieved by conventional means. For example, 2 trillion yuan of non-performing assets were disposed of last year, which, in essence, resolved the credit risks of the related institutions. Risks related to non-performing assets, either existing or newly-added ones, have all been defused through proper disposal and management. In addition, these institutions are also required to conduct strict screening management and risk control to newly-added loans. There are also many other existing conventional regulatory measures to defuse the risks.
In addition to conventional methods, some proactive measures need to be taken toward the high-risk small and medium-sized financial institutions. For example, as Mr. Huang mentioned earlier, last year, the CBIRC, together with the People's Bank of China, took over Baoshang Bank Co., Ltd in accordance with the law. It also handled risks, carried out reforms and the reorganization of HengFeng Bank Co., Ltd and Jinzhou Bank Co., Ltd. These are all major moves in this regard. For other institutions, we also managed non-performing assets, introduced new strategic investors, and carried out mergers and reorganizations based on market principles and the rule of law. As for the risks in small and medium-sized institutions, we will also adopt comprehensive methods to resolve them this year, but different measures will be taken according to the specific circumstances of each institution.
The second problem relates to illicit financial groups. Since the start of 2017, we've adopted various measures to crackdown on illicit financial groups so as to further regulate financial markets and prevent risks, and this work is still ongoing. These illicit agencies have held shares in financial institutions through various illegal measures, such as circulating capital, making false capital contributions and becoming nominal shareholders. After joining the financial institutions, these agencies have been found to have conducted illegal actions, such as colluding for the transmission of illicit profits, and engaging in affiliated transactions, which have seriously interfered in the regular business activities of financial institutions. All such behaviors should be regulated and cracked down on. The construction of an institutionalized system will be our priority in the future, for example, we are working on measures to tighten the review of shareholders' eligibility and optimize shareholding management so that those professional financial agencies with outstanding expertise and a long-term credit record both at home and abroad can be introduced as major shareholders. We will also map out some medium- and long-term plans for the governance and development of companies. These are the measures we are going to adopt during the 2020 working conference to address the problem of illicit financial groups. Thank you.
