SCIO briefing on reform and development of
banking and insurance sectors in 2020
Beijing | 3 p.m. Jan. 22, 2021

The State Council Information Office (SCIO) held a press conference in Beijing on Friday about the reform and development of the banking and insurance sectors in 2020.


Liang Tao, vice chairman of the China Banking and Insurance Regulatory Commission

Xiao Yuanqi, chief risk officer and spokesperson of the China Banking and Insurance Regulatory Commission


Shou Xiaoli, deputy head of the Press Bureau of the State Council Information Office

Read in Chinese


Liang Tao, vice chairman of the China Banking and Insurance Regulatory Commission (CBIRC) 

Xiao Yuanqi, chief risk officer and spokesperson of the CBIRC


Shou Xiaoli, deputy head of the Press Bureau of the State Council Information Office


Jan. 22, 2021

Shou Xiaoli:

Ladies and gentlemen, good afternoon and welcome to this press conference. Today, we are delighted to invite Mr. Liang Tao, vice chairman of the China Banking and Insurance Regulatory Commission (CBIRC), to brief you on the reform and development of China's banking and insurance sectors in 2020 and answer your questions. Alongside him is Mr. Xiao Yuanqi, chief risk officer and spokesperson of the CBIRC. Now, I would like to give the floor to Mr. Liang Tao.

Liang Tao:

Good afternoon, friends from the media. Thank you for your interest in and support for the work of the CBIRC. Let me first brief you on the reform and development of the banking and insurance sectors in 2020. 2020 was an extraordinary year. Under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, the banking and insurance sectors have worked hard to overcome the impact of the epidemic, responded to various risks and challenges, and continued to maintain sound operations. New achievements have also been made in reform and development.

First, assets and liabilities increased steadily. At the end of 2020, banking institutions saw their total assets reach 319.7 trillion yuan, up 10.1% year on year. Meanwhile, their total liabilities were 293.1 trillion yuan, up 10.2% year on year. The total assets of insurance institutions reached 23.3 trillion yuan, up 13.3% year on year; primary insurance premium income was 4.5 trillion yuan, up 6.1% year on year; and the balance of insurance funds was 21.7 trillion yuan, up 17% year on year.

Second, the quality and efficiency of serving the real economy continued to improve. In 2020, RMB loans rose by 19.6 trillion yuan, an increase of 2.8 trillion yuan over the previous year. Loans to private enterprises and manufacturing increased by 5.7 trillion yuan and 2.2 trillion yuan, respectively. Inclusive loans received by small and micro firms, loans to firms engaged in scientific research and technology services, and loans to firms engaged in information technology services increased by 30.9%, 20.1% and 14.9%, respectively. New bond investment of banks and insurance institutions reached 9.5 trillion yuan. The insurance sector provided 8,710 trillion yuan worth of insurance, an increase of 34.6% year on year; and the sector made a combined compensation of 1.4 trillion yuan, up 7.9% year on year.

Third, key business and risk indicators were kept within an appropriate range. In 2020, China's banking sector disposed of 3.02 trillion yuan in non-performing assets. As of the end of 2020, the balance of non-performing loans (NPLs) was 3.5 trillion yuan, up by 281.6 billion yuan from the beginning of the year; the NPL ratio was 1.92%, a decrease of 0.06 percentage points from the beginning of the year; and the ratio of loans overdue more than 90 days to NPLs stood at 76%, down 5.1 percentage points from the beginning of the year. The overall liquidity of banks and insurance institutions remained stable. The liquidity coverage ratio of commercial banks was 146.5%, and the cash flow from operating activities of insurance companies increased by 106.5% year on year.

Fourth, the ability to defuse risks has been strengthened through multiple channels. In 2020, 1.34 trillion yuan of commercial bank capital was supplemented through the issuance of preferred stock, perpetual bonds and tier 2 capital bonds. The banking sector set aside 1.9 trillion yuan in loan loss provision, an increase of 113.9 billion yuan year on year. At the end of 2020, the provision coverage ratio (PCR) stood at 182.3%, and the loan loss provision coverage ratio was 3.5%, both maintaining relatively high levels. According to preliminary statistics, commercial banks achieved a net profit of 2 trillion yuan, a decrease of 1.8% year on year. At the end of 2020, the capital adequacy ratio of commercial banks reached 14.7%. At present, the comprehensive solvency adequacy ratio of insurance companies stands at 242.5%, and the core solvency adequacy ratio at 230.5%.

Fifth, positive progress has been made in the reform and opening-up of the banking and insurance sector. We have been working continuously to facilitate and improve corporate governance of banking and insurance institutions, better incorporating CPC leadership into corporate governance, strictly regulating equity management, and strengthening supervision efforts and performance duties amongst directors, supervisors, and senior management. We have issued a working plan on the further reform and supplementing capital for small- and medium-sized banks and comprehensively promoted the reform and risk-resolving efforts amongst commercial banks in cities and credit cooperatives in rural areas. We have also promoted the reform of insurance mechanisms, publishing guidelines for the overall reform of auto insurance, studied the facilitation of China's third pillar pension insurance system and accelerated reforms in accident and agricultural insurance. We have also steadily expanded the opening-up of the financial sector, working to implement policies that promote opening-up and proactively review applications for market access by foreign-funded institutions. Since 2018, applications from foreign banks and insurance companies have been approved to allow them to establish nearly 100 various institutions in China.

The CBIRC will hold a meeting next week on the national supervisory works and make comprehensive plans for 2021. We will resolutely adhere to the centralized and unified leadership of the CPC Central Committee with regards to the financial sector based on China's new development stage and new development philosophy, and contribute to building a new development pattern. We will work to ensure stability on the six fronts and maintain security in the six areas, deepening supply-side structural reform in the financial sector and promote higher-level opening-up. We will also continue to prevent and resolve financial risks, further improve the quality and efficiency of the financial sector's ability to serve the real economy, and continue to make breakthroughs in the regulatory work of the banking and insurance sector. Thank you.

Shou Xiaoli:

Thank you, Mr. Liang. Now the floor is open to questions. Please identify your news outlet before asking questions.



Facing the severe and complicated economic situation both in China and abroad in 2020, especially due to the impact of COVID-19, what's the situation like regarding risk in the banking and insurance sectors? Also, how high are the credit risks in the banking industry? Have these risks been assessed? Regarding recent risk-related incidents in banks and insurance institutions, how are these issues being resolved? Thank you.

Liang Tao:

Mr. Xiao will answer your questions.

Xiao Yuanqi:

Thank you for your question. As you mentioned, 2020 was truly an eventful year and banks and insurance institutions were indeed affected. However, the current situation is much better than what we estimated at the beginning of the year and the risks of banking and insurance have generally been kept under control. Mr. Liang has already briefed on some of the operating and regulatory indicators of the banking and insurance sectors in 2020, here I will not repeat them. I believe that the reasons for the current situation lie in the following aspects.

First, our work is always to ensure the banking and insurance sectors serve and support the real economy. It is precisely because we have increased support in this regard that the risks faced by banking and insurance institutions are controllable. When the real economy grows well, these institutions will naturally encounter fewer risks; otherwise, their risks will increase. We adopted some special policies at the beginning of this year, especially those helping small and micro-enterprises and private enterprises to overcome difficulties, such as postponing principal and interest repayments on loans and flexibly adjusting regulatory measures. These policies provide enough time and space for the banking and insurance institutions, through their own operations and management, to better serve and promote the development of the real economy. Last year, China's GDP grew by 2.3%, exceeding expectation. China is the only major economy in the world registering positive economic growth in 2020.

Second, we have focused on and adopted many measures to prevent and deal with risks involved in existing non-performing assets. For example, we have disposed of 3.02 trillion yuan in non-performing assets through liquidating, write-off and transferring, etc., with the efforts and amount involved both being unprecedented. We have conducted stricter screening of high-risk institutions and tackled relevant risks. The high risks confronting some small and medium-sized financial institutions, like Baoshang Bank, the Bank of Jinzhou, Hengfeng Bank and some trust companies and insurance institutions, have been effectively defused, easing their burdens. 

Third, we have taken proactive measures to prevent risks. Arrangements have been made in advance to avoid risks of key areas.

In the real estate sector, we have established a comprehensive and unified statistical system for real estate financing. Earlier, the CBIRC and the People's Bank of China issued a notice on the concentration management of real estate financing. If the real estate risk exposure of banking institutions exceeds a certain proportion of the net capital, relevant measures must be taken. At the same time, we have been closely following the changes in housing prices in different regions and cities, and cooperated with other departments and local governments to take appropriate measures based on local conditions. These measures are dynamic and can be adjusted at any time according to local conditions.

We have remained vigilant about shadow banking. Last year, China released its first report on this issue, which you might have covered. We have always stayed alert in regard to shadow banking. Since early 2017, we have made great efforts to improve regulation over the shadow banking sector and achieved great results. Since 2017, the scale of high-risk shadow banking business has shrunk by 20 trillion yuan and this achievement must be consolidated continuously. There was no let-up in our efforts last year as well, so as to firmly prevent high-risk shadow banking business from rebounding .

We intensified banking and insurance institutions' ability to withstand risks. Last year, we took multiple measures to require the banking sector to replenish capital through different markets and various channels, such as bringing in strategic investors, leveraging tier-2 capital tools, and issuing perpetual bonds. In addition, we encouraged local governments to issue special bonds to replenish the capital of small- and medium-sized banks, especially local banks. Currently, this work is underway and has achieved great progress in helping banks to increase capital. By increasing provisions, we strengthen our ability to fend off risks. When disposing of NPLs, we reduced some of our provisions and increased our withdrawal of provisions at the same time to better fend off risks.

These measures took effect across multiple channels and thanks to this multi-pronged approach, risks in banks and insurance institutions are manageable on the whole, no matter whether they're individual, regional, or systematic risks. Just like Mr. Liang said before, operations in the banking and insurance sector are stable and indicators drawn from either institutional performance or risk regulations have remained within an appropriate range. Thanks.



I'd like to ask a question about corporate governance. Last year, CBIRC disclosed lists of non-compliant shareholders and intensified supervision work for corporate governance over the last two years. After the disclosure of lists, has there been any follow-up? What measures were taken last year and what new measures will be taken for this year's work? Thank you. 

Liang Tao:

Thank you for your questions, I will answer them. Just like you said, CBIRC attaches great importance to the supervision work and governance reform of banking and insurance institutions and sees the enhancement of corporate governance as a means to improve banking and insurance institutions' abilities to withstand risks and achieve high-quality development. Our work mainly relates to four aspects as follows:

First, we enhanced the top-level design. Last year, we released the Three Year Action Plan for Improving Corporate Governance of Banking and Insurance Sectors (2020-2022), which outlines the roadmap and timetable for supervision work and reform for corporate governance in the banking and insurance sectors over the next three years.

Second, we strengthened points of weakness in the system. We stepped up the building of the corporate governance regulation system and set up rules for companies in the banking and insurance sectors to obey. These were targeted at addressing major issues such as behaviors of large shareholders, connected transactions, deductions from salary, evaluation of the performance of corporate directors and supervisors, and poor records on equity management. For key issues, we are ready to formulate special regulatory regulations.

Third, we carried out regulation and assessment. We have completed our assessment on corporate governance of all commercial banks and insurance institutions for the first time. We evaluated the governance of 1,792 institutions. Generally speaking, most institutions were rated B (good) and C (regular). The number of companies rated B and C stands at 1,400, accounting for 78.12% of the total. A total of 209 institutions were rated D (bad) and 182 institutions were rated E (very bad), accounting for 11.66% and 10.16%, respectively. Through the evaluation, regulators were able to grasp a comprehensive understanding of the corporate governance system in banking and insurance sectors in a timely manner. By conducting rectification and supervision work based on these assessments, regulators will push companies in the banking and insurance sectors to enhance the quality and efficiency of corporate governance.

Fourth, we conducted specific rectifications. Focusing on small and medium-sized institutions, we sternly dealt with activities that violated laws and rules, such as fraudulent capital, share-holding entrustment, shareholders' direct interference in company operations, and benefits transfer through improperly connected transactions. We inspected 4,600 legal entities, handled over 3,000 equity violations, and in two batches, disclosed to the public a list of shareholders of 47 banks and insurance institutions who severely violated laws and rules and led to serious social impacts. We also appropriately cracked down on equities of illegal shareholders in high-risk institutions and removed them in an orderly way.

In general, through the continuous efforts made by the financial regulators and the industry over the past year, China's banks and insurance institutions have achieved positive outcomes in corporate governance and reform. However, several existing problems should be brought to the forefront. First, the Party building in some state-owned institutions has become weakened and they failed to realize the integration of the Party's leadership with corporate governance. Second, some institutions were found to have prominent problems, including a lack of transparency in ownership structures, share-holding entrustment, prevalence of dormant shareholders, and shareholders overstepping their bounds with misconducts. Some big shareholders directly interfered with an institution's operations and pulled strings to control the board of directors and top executives to realize benefit transfer through illegal connected transactions thus misappropriating the institution's interest at will. Third, the boards of directors in some institutions operated irregularly; some non-executive directors could not, dared not, or were unwilling to perform their duties, and the independence and professionalism of some directors could not be guaranteed at all. Fourth, information disclosure was not standardized, and the rights and interests of stakeholders, including financial consumers, could not be adequately protected. 

In 2021, the CBIRC will thoroughly implement the spirit of the Central Economic Work Conference, continuously promote banks and insurance institutions to enhance their corporate governance, uphold and strengthen the Party's overall leadership relating to financial work, promote the integration of the Party's leadership with corporate governance in state-owned banks and insurance institutions, improve with speed the supervision system in corporate governance, and step up efforts to issue regulatory rules on corporate governance, big shareholder conduct, connected transactions, remuneration deductions, and director and supervisor performance evaluations. We will also improve commercial bank equity custody mechanisms, step up medium- and long-term classified punishment system for shareholders, take measures like "blacklisting," restricting stockholders' rights, and exposing and cracking down on illegal stockholders. We will carry out corporate governance supervision assessments, strengthen classified supervision, and intensify market discipline. In addition, we will also improve the corporate governance regulatory information system to enhance the informatization level of our supervision. Thank you.


China Daily:

The market shows that after the government and regulators took anti-monopoly measures on internet platform enterprises, banks became reluctant to lend and even suspended loans to private enterprises in internet-related fields. Is this true? What's the comment from the regulatory agencies? Thank you. 

Liang Tao: 

Let me answer this question. The private economy is an indispensable power in the promotion of economic development in China. Private enterprises are important components of the economy. The financial regulator has always supported the development of the private economy, treated the private economy as a key issue, guided financial institutions to offer all-round financial services to private enterprises, and could be credited with having achieved great accomplishments. 

Recently, the financial governance department arranged talks with several internet platform companies such as the Ant Group, acknowledging their financial technological innovations, efficient financial services, and inclusiveness. However, they also pointed out their problems such as arbitrage through irregular governance, monopolizing, and impairing customers' interest. According to the basic requirements for strengthening anti-monopoly regulations and preventing capital from growing in a disorderly manner, the financial governance department has taken a series of regulatory measures, clearing up and rectifying the situation. These measures are not only in accordance with the law of market economy development such as upholding anti-monopoly and anti-illegitimate competition as well as the requirements of the rule of law, but also meet the fundamental interests of our people and all market entities. They also help private companies to sustain long-term, steady, and healthy development. Of course, those measures have not been taken to target private companies or a specific company, and will not affect the normal business development of relevant companies. As for the question you asked just now regarding whether some banks stinted or altogether stopped providing loans to private enterprises in some sectors, we indeed found several cases where this was the case via our investigation. We consider that this behavior is not consistent with the "two unwaveringly" requirements, and should be rectified. The CBIRC will encourage banks and insurance institutions to cooperate with internet platform companies, including those in question, according to laws and regulations. Policies for financial support remain unchanged and will not be reduced.

We noticed that some internet platform enterprises have been quick to rectify their behaviors after being questioned. According to preliminary results, we believe that through regulation and rectification, these internet platform enterprises will stick to the goal of serving the real economy and the people, and uphold fair play in the market. They must innovate while also keeping to the right path under the principle of serving the real economy, adhering to prudential supervision so as to become an important force in supporting the national economy and promoting domestic and international circulations. Thank you.


Recently, some online mutual-help platforms have developed rapidly but have the characteristics of commercial insurance companies by nature. However, there are currently no clear regulatory bodies or standards, leaving them unsupervised. The internet company Meituan recently announced the closure of its internet mutual-help platform. How will the supervision administration supervise internet mutual-help platforms and better regulate the insurance market? Thank you.

Xiao Yuanqi:

Thank you for your question. Meituan's mutual-help platform indeed announced at 5 o'clock on Jan. 15 that they would officially stop its service on Jan. 31. A few days ago, Baidu also stopped its internet mutual-help platform, which gave rise to great concerns. The main reason for Meituan to close its mutual-help platform is that they had deviated from their main business and adverse selection risks had been mounting in the company. Next, we will further focus on the mutual-help services of internet companies, learn their operational methods and risks, and take corresponding measures accordingly. Thank you. 



We all know that the reform of small and medium banks is important in the supply-side structure reform of the Chinese financial sector. Currently, common problems found in small and medium banks relate to the lack of core competitiveness, relatively high risks, and inadequate capital. What has the CBIRC done to tackle these issues since last year? 

Xiao Yuanqi:

In fact, during his answers to related questions and report just now, Mr. Liang has given you a relatively comprehensive introduction to the reform of small and medium-sized banks and other reforms. Let me just add a few points.

Last year, we took the reform of small and medium-sized banks as an important task and achieved several results. First, the structure of the entire banking system has been further optimized, leading to the establishment of a system with entities of different scales and different characteristics, each of which can support and complement one another. The system includes some very large banks, such as the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and Bank of Communications. These four banks are all globally important banks, ranking among the top in the world in terms of scale and business diversity. There are also medium-sized banks, and some very small regional banks, even community and village banks. In short, by optimizing the banking system's structure and creating a diversified and distinctive banking system with wide coverage, the system can now provide the real economy and broad consumers with convenient, cost-controllable and comprehensive financial services.

Second, we further clarified the development direction of small and medium-sized banks. Small and medium-sized banks and regional banks must take several steps. The first is to develop locally. They cannot do business all around the country, and in principle, should only develop locally. The second is to focus on small and micro enterprises, the three rural subjects of "agriculture, rural areas and farmers," and personal financial services in order to meet the financial needs of local enterprises and residents. The third is to conduct inclusive finance, especially filling in for some weak links and fields. This is where the advantages of small and medium-sized banks lie, and it is also the mission they should undertake. Small and medium-sized banks must be able to resist the temptation to blindly grow bigger, should take root in the local areas, and should focus on being small, detail-oriented and solid.

Third, we have done a lot of work in corporate governance. Mr. Liang has already introduced this work, so I won't repeat it.

Fourth, we have further clarified the responsibilities of small and medium-sized banks in strengthening CPC leadership, operation management and supervision. The operation of banks is the responsibility of each bank's managers. In particular, the board of directors bears the ultimate responsibility, and shareholders must perform their responsibilities. Local Party committees and governments should bear the leadership responsibility of the Party, while also having the responsibility to maintain local financial stability. The regulatory department is responsible for regulations.

Fifth, we have made great efforts to replenish the capital of small and medium-sized banks and consolidate their capital strength. Thank you.


China News Service:

In recent years, the CBIRC has introduced a series of measures to support the development of the private economy. The scale of bank loans to private enterprises also continues to rise. However, during interviews, we found that some private enterprises have encountered difficulties regarding bank financing. I would like to ask why this happens? And going forward, how will the CBIRC continue to support the development of private enterprises? Thank you.

Liang Tao:

By the end of 2020, the balance of loans to private enterprises went up 14% year-on-year to 50 trillion yuan; the balance of inclusive loans to small and micro business was 15.3 trillion yuan with a growth rate that is 18.1 percentage points higher than that of all loans. However, as you say, private enterprises, especially small and micro business, still face financing difficulties in the market. 

Private enterprises involve a huge group covering all sectors of the national economy. They include both large and medium-sized enterprises and small and micro businesses. For large and medium-sized private enterprises, some have financing difficulties due to unsound corporate governance and unclear property rights, some due to deviation from their main business lines in unilateral pursuit of group and diversified operation, and some due to an unreasonable financing structure without giving overall consideration to the capital source and cost deadline, where a slight careless step in operation or market fluctuation will lead to tensions in the funding chain. Financing for small and micro businesses with high risks is a worldwide problem that requires the efforts of the whole society to deal with.

The CBIRC will further improve related institutions and measures, focusing on promoting policy implementation. There are already many policies in place and the key is to implement them in a targeted way to support the sound development of private enterprises. They can be classified as follows: First, for private enterprises with clear main business lines, financial soundness as well as a good credit rating of their major shareholders and actual controllers, banking agencies are required to keep checking their primary sources of repayments, reduce heavy reliance on mortgage guarantees and increase credit loans. Second, for private hi-tech enterprises engaged in advanced manufacturing, strategic industries as well as in building independent and controllable industrial and supply chains, banking and insurance agencies are encouraged to significantly increase medium-and-long-term financial support, develop science and technology insurance, continue to improve financial services favorable for innovation, support breakthroughs, fundamental research and application of core and key technologies, and give backing to innovative pledge financing products of intangible assets. Third, for private enterprises that conduct business in accordance with laws and regulations and have the ability for technological innovation, including private Internet-based enterprises, banking and insurance agencies will be supported to continue cooperation with them according to laws and regulations and provide quality financial services to better support the real economy. Fourth, for private small and micro businesses with good market prospects, strong ability to provide employment, and up to the standards of inclusive loans to small and micro businesses, we will continue with the policy of allowing them to postpone principal and interest repayments as well as the credit loan support plan, and guide banking agencies to expand lending for first-time loan renewals, credit loans, and medium-and-long-term loans so as to keep financing costs at a reasonable level. Fifth, for private enterprises facing temporary difficulties, banking and insurance agencies will be guided to adopt specific support measures in accordance with market rules and rule of law and focus on defusing liquidity risks for enterprises. For private enterprises which go in line with the direction of optimization and upgrading of the economic structure and display competitiveness but are facing difficulties temporarily, banking and financial agencies will be encouraged to establish a creditors' committee to strengthen coordination, avoid indiscriminately stopping, withholding or withdrawing loans, and provide necessary financing support so as to help such enterprises maintain and resume normal operation. Sixth, for private enterprises at risk, they are required to seek sound development in the process of solving problems and save themselves by divestment of non-main business assets and focusing on easing risks. Meanwhile, they can turn to local government for help. Banking and insurance agencies will be encouraged, on an equal and voluntary basis, to help enterprises improve their debt structure and corporate governance through a combined use of multiple means such as capital increase to expand stockholding, financial restructuring, merger and reorganization as well as market-based debt-to-equity swaps.

If the economy can be viewed as a body, finance would be the blood; they co-exist and prosper together. In the face of a complex and volatile international and domestic economic situation, China's financial institutions will adhere to the original mission of providing services to the real economy, and promote the construction of a community with a shared future for banks and enterprises, so as to achieve common development and prosperity with private enterprises. Thank you.



Among the data just mentioned, I found that although the profits of commercial banks declined, the expansion velocity of the total assets of banking financial institutions grew even faster than the previous year. How do you view this? What is the expected change for the profits of commercial banks as well as the non-performing loan ratio of banking financial institutions in 2021? Thank you.

Xiao Yuanqi:

You have asked a very good question. It seems that you have run the numbers through. It is true that, last year, the assets size, especially the scale of loans by banks showed a considerable increase. As Mr. Liang said, last year, the loans had increased by more than 19 trillion yuan, but profits declined. The reasons include the following aspects: first, we asked the banks to return profits to enterprises, especially those small and micro businesses, and we have already achieved the target of returning profits valued 1.5 trillion yuan, which is no small figure. Second, we strictly investigated and dealt with illegal charges. Last year, we basically eliminated all the unreasonable charges existing in previous years; thus, the income related to bank charges declined. Third, after the marketization reform of the interest rate system, the interest margin of the banks shrank continuously. Currently, the interest margin of banks is about 2% on average; for a long time, it had been around 3%. While the interest rate of loans has declined constantly, that of deposits has not changed, or has even increased. The narrowing of interest margin was due to a rise in the overall cost of debt in regard to deposits. Recently, the yield rate of financial products we can buy from the banks reached 3% to 4%. There was a time when the interest rate of structural deposits also reached 3%-4%, and the interest rate of some banks was even higher. The interest rate of certificates of deposit was also around 3%. Therefore, the cost of debt increased. A combination of all these factors led to a rise in the size of assets and a decline in profits for banks. We believe that this is a very normal phenomenon. Generally speaking, the profitability of our banks is relatively healthy, and the rate of capital return and return on assets of our banks are also above the average level in the world. Therefore, there is still enough resources to supplement capital.

Your second question is regarding NPLs. Looking at the numbers, the NPL ratio dropped by 0.06 percentage points last year. There are many reasons for this. First, we have required banks to strengthen risk management and three aspects of loan checks, namely, pre-loan investigation, in-loan review and post-loan inspection. Banks must strictly guard against risks. Second, banks should increase their efforts in disposing of NPLs. A total of 3.02 trillion yuan of non-performing assets were disposed of last year, which was an unprecedented amount. Third, last year's economic growth exceeded expectations. China's economy grew by 2.3%, which created a good foundation for preventing a substantial rebound of banks' NPLs. However, supervision should focus on this issue from a prudential perspective. We should also be aware that the future situation of banks' NPLs is still relatively serious. It is possible that potential NPLs could increase, but we have conducted stress tests and made contingency plans accordingly. Thank you.


21st Century Business Herald:

As Mr. Xiao mentioned, there are certain requirements regarding real estate loan concentration, which took effect on Jan. 1 this year. Do these requirements apply to existing loans and how much impact this would have on personal mortgage loans. Secondly, how is the reform work going in terms of the four major financial asset management companies and provincial rural credit unions? Thank you.

Xiao Yuanqi:

As I mentioned, a while ago, the CBIRC and the People's Bank of China jointly issued a notice on real estate loan concentration requirements for Chinese banks. We are not only supervising the bank's concentration ratio in the real estate industry, but also in businesses in all industries. There have long been concentration ratio regulations for industries, single enterprises and single groups. This concentration ratio is linked to the risk asset exposure and net capital. For example, we used to require that the concentration ratio for a single enterprise should not exceed 10% of the capital, the concentration ratio for a group should not exceed 15%, and that of an industry should not exceed 25%. Therefore, the real estate industry is no exception. The real estate industry has its own concentration ratio, and it should follow the unified requirements for concentration ratio supervision. Each real estate enterprise should also follow the unified requirements for concentration monitoring. In fact, the notice on real estate is not new, and there has been management of loan concentration in the past. So, in the future, we will act in accordance with the existing management regulations and the requirements of this notice, and continue to closely monitor financing from the banking industry to the real estate sector, in order to ensure that real estate fundraising is stable and orderly. This will have little effect on mortgage loans. Mortgage loans are highly fragmented in terms of both scale and scope. So the concentration requirements won't effect it much.

As for the reform of small and medium-sized banks, I've already given some explanations. The reform of asset management companies has been underway. All reforms must relate to each sector's main business. The main business for asset management companies is to dispose of and manage non-performing assets (NPAs) as well as put these assets to good use. All asset management companies must focus on these tasks. Other kinds of businesses must also serve this purpose, otherwise, they should be stopped. Asset management companies also need to improve their corporate governance, innovate their methods and tools, and create new markets. The direction of their reform and development remains unchanged. Thank you.



My question is also about the bad debt reported by banks. Statistics show that as of the end of 2020, NPLs reported by commercial banks reached 3.5 trillion yuan. Industry insiders said the pressure to dispose of NPLs will continue this year. How will such pressure be relieved? Thank you.

Xiao Yuanqi:

The increase of NPLs is dictated by law. As the total amount of assets increases, a corresponding proportion of new NPLs emerge. As I said just now, the NPL ratio dropped slightly last year, but the banking sector still faces pressure to dispose of NPLs.

First, there are some requirements for the disposal process. For example, procedures are different for the transfer of single corporate loans and the bundle transfer of personal NPLs. Also, loans can't be classified as NPAs before the court issues a ruling that is what they in fact are. These are not obstacles to the disposal of NPAs, though they will extend the time required to dispose of them.

Second, profits have declined, and for some banks, the pressure to make provisions will increase a little and they will be less capable of writing off NPLs using provisions. For the banking sector as a whole, provisions are increasing and capacity is rising. However, the structure is somewhat imbalanced and so the profits of some banks have declined relatively fast and they therefore have less resources to draw from for provisions.

Third, we should take a forward-looking approach and estimate potential risks in the increase of NPAs. This doesn't mean that the NPAs reported by banks are bound to increase, however, we need to estimate the risks because banks should be prudent in their operations and think more about possible difficulties that could arise in the future. In the case of NPL increase, banks need to take precautions now and make suitable response plans. For example, they need to introduce precautionary measures to increase necessary resources and they should not sit idle waiting for the risks to occur. Thank you.

Shou Xiaoli:

Thank you, Mr. Liang and Mr. Xiao. Thanks to friends from the media. Today's SCIO press conference is hereby concluded. Goodbye.

Translated and edited by Wang Yiming, Zhang Liying, Zhu Bochen, Li Huiru, Mi Xingang, Zhang Junmian, Liu Jianing, Zhang Rui, Liu Qiang, Lin Liyao, Fan Junmei, Yan Xiaoqing, Guo Yiming, He Shan, Cui Can, Wang Qian, Yuan Fang, Duan Yaying, Yang Xi, Xu Xiaoxuan, David Ball, Geoffrey Murray, and Tom Arnstein. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.

/4    Shou Xiaoli

/4    Liang Tao

/4    Xiao Yuanqi

/4    Group photo