Like many reforms in China, small and medium-sized financial institutions have also exposed various pathologies after their rapid development and growth. Taking the road of mergers and acquisitions and readjusting the market division of labor may not be a "panacea" for treating small and medium-sized financial institutions, but the situation has forced small and medium-sized financial institutions to face such a choice.
why should we rectify small and medium-sized financial institutions
at present, small and medium-sized financial institutions (non-securities and insurance financial institutions other than state-owned commercial banks) account for about one-third of the market share and have become a new force in the financial industry. However, why should we rectify them?
Jiang Yingxiang, president of China Industrial and Commercial Bank, believes that this is an important measure to prevent and resolve the risks of small and medium-sized financial institutions and promote their development. He said that these small and medium-sized financial institutions were restricted by factors such as strategy and management in the development process, and some small and medium-sized financial institutions had serious payment risks, which had a certain negative impact on economic and financial development and security.
Li Yang, deputy director of the Institute of Finance and Trade of China Academy of Social Sciences, said that the key to the accumulation of risks in small and medium-sized financial institutions is the mistakes in development strategies. Influenced by the guiding ideology of "develop first, then standardize and then improve", small and medium-sized financial institutions have many defects at the beginning of their establishment. First, there is a lack of scientific analysis and unified planning, and there is no scientific analysis and evaluation of the market demand of small and medium-sized financial institutions. There is no overall plan in the development schedule and access conditions, and the development ideas have been blind from the beginning. Second, there is no strict definition of the development space of each type of institution. For example, trust and investment companies engage in a large number of high-risk businesses such as commercial banks, securities, industrial investment and foreign exchange and futures; The financial leasing company has become a "second trust company"; Credit cooperatives have become "small banks" with no cooperative significance. Third, small and medium-sized financial institutions are not matched with the reform and development of state-owned commercial banks. According to the requirements of reform and development, state-owned commercial banks will give up some market space in some areas and fields, but the establishment and development of small and medium-sized financial institutions have not been linked accordingly.
in addition, the market access is not strictly controlled, and the development of small and medium-sized financial institutions is excessive. According to statistics, among about 3, urban credit cooperatives at present, only about 1, are located in prefecture-level cities, and the remaining 2, are located in counties or county-level cities. According to the relevant regulations at that time, urban credit cooperatives can only be established in prefecture-level cities, but not in cities below the county level. Small and medium-sized financial institutions lack capital, and their ability to resist risks is inherently fragile.
Professor He Qiang, director of the Finance Department of the Central University of Finance and Economics, also pointed out that the reason why small and medium-sized financial institutions accumulate such great risks is that their corporate governance structure is not strict and there is no effective supervision mechanism. The chairman often oversteps his authority and intervenes in business operations, turning financial institutions into financing windows for an enterprise. Small and medium-sized financial institutions also have strong local attributes, and their business operations are more vulnerable to administrative intervention by local governments.
China is about to join the WTO, and the pattern of international financial integration is about to take shape. Judging from the current situation of small and medium-sized financial institutions, the consequences are unimaginable if they are not cleaned up and rectified.
financial market reshuffle
to rectify and merge small and medium-sized financial institutions, it is required that their registered capital must reach 3 million yuan or 5 million yuan, which objectively forces some small and medium-sized financial institutions to unite or reorganize, thus strengthening their capital strength, which is also an inevitable choice for China's imminent accession to the WTO and the survival of small and medium-sized financial institutions.
small and medium-sized financial institutions must make some adjustments in the market division of labor in the process of rectification. President Jiang Yingxiang said that small and medium-sized financial institutions are at a disadvantage in market competition because of their small assets, high transaction costs and incomplete service functions. To survive and develop, they must get policy support from the government and the central bank, which is also a common practice in all countries of the world. To resolve the risks of small and medium-sized financial institutions, we must give them a correct market positioning. We should combine the reform of state-owned commercial banks to expand the development space of small and medium-sized financial institutions. The People's Bank of China should make appropriate adjustments to the existing institutional layout according to the proper division of business of financial institutions in the addition of institutional outlets. Branches of state-owned commercial banks should be contracted from counties and towns and transferred to urban and rural credit cooperatives to expand their living space. Due to the lack of cooperation in many urban and rural credit cooperatives at present, we can consider not retaining them in municipalities directly under the central government, provincial capitals and some developed prefecture-level cities, but setting them up as city commercial banks, or merging state-owned commercial banks and joint-stock commercial banks as their branches. In this way, a pattern has been formed in which big banks mainly take big cities as their development space and small and medium-sized financial institutions mainly serve small and medium-sized cities and rural areas.
It is understood that the pilot reform of rural credit cooperatives has already begun in Jiangsu Province, and more than 1,7 rural grassroots credit cooperatives in the province should be established as independent first-class legal entities within this year, operating independently and taking charge of their own profits and losses. State-owned commercial banks have also begun to "retreat" from below the county level. Among the 18 towns and villages in chengwu, Heze, Shandong, there are 18 outlets of China Agricultural Bank, 3 outlets of China Bank, 18 post and telecommunications savings offices and 6 rural foundations. At present, all six foundations have been closed, five outlets of China Agricultural Bank have been cancelled, and it is said that seven more will be cancelled in the near future. Fu Daoqing, deputy director of Tianji Town Rural Credit Cooperatives in this county, said that the branches of state-owned commercial banks should indeed shrink from counties and townships. These state-owned commercial banks set up outlets in rural areas only to absorb deposits and do not give farmers loans to support agricultural production. Therefore, it is of little significance for them to set up outlets in rural areas, which has intensified the vicious competition in rural financial markets.
in addition to the advance and retreat in institutional setup, the rectification and merger of small and medium-sized financial institutions are also facing the difficulties of merger and consolidation. Wang Junchao, the economics department of the Central Party School, believes that, except for some small and medium-sized financial institutions, they should be encouraged to merge and develop in the process of merger and consolidation. On the one hand, the central bank should give policy guidance, on the other hand, the merger and consolidation of small and medium-sized financial institutions should be eclectic, such as the merger of joint-stock commercial banks with city commercial banks or some local non-bank financial institutions and urban and rural credit cooperatives, or between the same level, such as the merger and consolidation between joint-stock commercial banks and city commercial banks.
Professor Hu Jian of Peking University University of Economics is also very supportive of the reshuffle of small and medium-sized financial institutions. However, she believes that the adjustment of such financial institutions should be based on market self-selection. If there is too much administrative intervention, the result will be futile.