Nuclear viewpoint

Liaoyang Rural Commercial Bank became the second bank to enter bankruptcy proceedings after the contractor.

Their common characteristics are: private ownership, major violations of laws and regulations by shareholders, and major problems in operation, which lead to insolvency.

Since the contractor incident, the central bank has accurately handled many risks of small and medium-sized banks, including dealing with the risks of contractor banks through acquisition and undertaking, and breaking the rigid payment in an orderly manner; Dealing with the risks in hengfeng bank by means of "capital injection by local governments, leading to war and restructuring"; Resolving the risks of Jinzhou Bank by "online repair".

Looking back at the risk disposal of the three small and medium-sized banks, the classification policy fully considered the different characteristics of each institution, and then adopted different disposal methods accordingly, realizing the orderly and steady resolution of risks.

To sum up, look at the risk disposal methods of small and medium-sized financial institutions by policies:

First, on the premise of providing qualified and sufficient collateral, financial institutions with liquidity risks but insolvent assets should try their best to promote "online repair". Deposit insurance funds or central banks can provide liquidity support; For insolvent institutions, in principle, we should strictly enforce market discipline and implement market withdrawal.

Second, we should consider the systemic impact. For financial institutions with systemic influence, even if they are insolvent, it is difficult to "once and for all" in practice. We need to weigh the relationship between preventing systemic risk and moral hazard.

Third, we should consider external constraints, including the grasp of the risk base, the market situation at the time of disposal, and the importance attached by local governments. Financial risk disposal needs to give full play to the role of local governments and compact territorial responsibilities. Practice shows that the more active the local government is, the more solid its responsibility is, the better its disposal effect is and the smoother its progress is.

After signing the contract, we found that, generally speaking, small and medium-sized banks mainly handle online repairs. Although Liaoyang Rural Commercial Company entered bankruptcy, the premise of bankruptcy is that there are no surviving financial market bonds, and the risks in the same industry are controllable.

Generally speaking, the bankruptcy of Liaoyang Rural Commercial Bank did not affect the market, and the policy has rich experience in dealing with the risks of such small and medium-sized financial institutions. Although banks, especially small and medium-sized banks, still face certain operational pressures, we still emphasize that we should believe that the central bank is the lender of last resort and have confidence in the central bank. The central bank has formulated a classification policy to accurately dismantle bombs, and at the same time, it will also consider avoiding risk infection when dealing with them. Therefore, we still adhere to the basic judgment of "no contractor", and the overall credit risk of bank financial bonds is still controllable.

1. What do you think about Liaoyang Rural Commercial Bank entering bankruptcy proceedings?

On August 26th, 2023, China Banking and Insurance Regulatory Commission announced that Liaoyang Rural Commercial Bank and Taizihe Rural Bank were allowed to enter bankruptcy proceedings. As the first two banks to go bankrupt since the bankruptcy of Baoshang Bank, why did they go bankrupt? How to treat the impact of this incident? How to treat the financial risks of small and medium-sized banks?

1. 1. Why do you want to go into bankruptcy proceedings?

Basic information: Liaoyang Rural Commercial Bank was established on the basis of three rural credit cooperatives in Hongwei District, taizihe district District and Gongchangling District of Liaoyang City from 2065438 to June 2006, with a registered capital of 5.62 billion yuan. As of 20 19 (financial data has not been disclosed since), the revenue in 20 19 was 3.275 billion yuan, the total assets were1575.06 billion yuan, and the asset-liability ratio was 93. 1 1%.

From the perspective of ownership structure, its largest shareholders are Beijing Zhengtai Hongsheng Investment Management Co., Ltd. (hereinafter referred to as "Zhengtai Hongxing") and Beijing Anxin Golden Century International Investment Co., Ltd. (hereinafter referred to as "Anxin Golden Century"), and the largest shareholder after the equity penetration is Zhongwang Department. On the whole, Liaoyang Rural Commercial Bank's shareholding is scattered and its shareholding structure is complex.

Liaoning Taizihe Rural Bank was established in 20 1 1 year with a registered capital of 1 billion yuan, and Liaoyang Rural Commercial Bank holds 49% of the shares, which is controlled by Liaoyang Rural Commercial Bank.

After 20 19, Liaoyang Rural Commercial Bank stopped disclosing financial data due to operational difficulties. Judging from the published annual report, in terms of capital adequacy ratio, although the asset scale of Liaoyang Rural Commercial Bank continues to expand, the overall capital adequacy ratio shows a downward trend and the capital situation continues to deteriorate.

In terms of asset quality, by the end of 20 19, the amount of loans and advances issued by banks reached 705,438+billion yuan, but the quality of loan assets continued to decline. At the end of 20 16-20 18 and 20 19, the non-performing loans of Liaoyang rural commercial bank were158 million yuan, 340 million yuan, 288 million yuan and 345 million yuan respectively.

In terms of loan concentration, from 20 16 to 20 19, the loans of the top ten customers of Liaoyang Rural Commercial Bank accounted for 6 1.5 1%, 54.56%, 78.26% and 83.93% respectively. The total loan of Liaoyang Rural Commercial Bank to the top ten customers exceeds the regulatory requirements and should be less than or equal to the red line of 50% of the bank's net capital.

Disposal method:

On June 2, 2023, Kloc-0, Liaoning Banking Insurance Regulatory Bureau approved the establishment and opening of Liaoyang Branch of Shenyang Rural Commercial Bank; On July 2, Shenyang Rural Commercial Bank took over the personnel, outlets and deposits of Liaoyang Rural Commercial Bank and Taizihe Rural Bank. Passbooks, certificates of deposit, bank cards and other trading media handled by customers in two banks can be used in Shenyang Rural Commercial Bank or replaced free of charge. The security of funds and transactions will not be affected, the deposit and withdrawal business will be handled normally, all services will remain unchanged, and the legitimate rights and interests of depositors and other customers and obligees will be safeguarded; On August 26th, China Banking Regulatory Commission announced that it had approved two banks to enter bankruptcy proceedings.

As the undertaker, Shenyang Rural Commercial Bank was established on 20 1 1. The annual report of 20021shows that its total assets reached 6494 1 100 million yuan, equivalent to about 40% of Liaoyang Rural Commercial Bank at the end of 20 19. In 202 1, its performance is also very poor. During the reporting period, the bank achieved revenue of 665.438+0.09 billion yuan, a year-on-year decrease of 38.35%; The net profit turned from profit to loss of-29 million yuan, compared with 27 million yuan in the same period last year. At the same time, the asset quality and capital adequacy ratio of Shenyang Rural Commercial Bank failed to meet the regulatory requirements. By the end of 20021,although the asset quality of Shenyang Rural Commercial Bank had improved compared with the previous year, the relevant indicators were still below the regulatory red line, and the non-performing loan ratio of the bank decreased by 5. 12 percentage points to 6.69% compared with the end of last year.

The provision coverage ratio increased by 1.6 percentage points to 57.68% compared with the end of last year. In terms of capital adequacy ratio, by the end of 20021,the bank's capital adequacy ratio and core tier 1 capital adequacy ratio had both increased to 7. 1%, but they were still lower than the regulatory requirements of 10.5% and 7.5% respectively.

What are the similarities and differences between the bankruptcy procedure of another bank and the previous bankruptcy of Baoshang Bank? What is the impact on the financial market? How to treat the risks of small and medium-sized banks?

1.2. Which banks went bankrupt or merged or reorganized in history?

First of all, let's review which banks have gone bankrupt in history. Except Liaoyang Rural Commercial Bank and Taizihe Rural Bank, some bankruptcies have occurred since 1998, only Hainan Development Bank and Baoshang Bank.

(1) Hainan Development Bank: 1998 was declared bankrupt, becoming the first bank declared bankrupt in history. From 65438 to 0995, Hainan Development Bank was formally established. In the early days of its establishment, Hainan Development Bank was in a relatively good state of development, and even consolidated and managed the creditor's rights and debts of several credit cooperatives. However, there are more and more non-performing assets in these credit cooperatives, and many problems have caused depositors to no longer trust banks, which has triggered a large-scale run. Unable to repay its debts, Hainan Development Bank was finally forced to close down and go bankrupt. Subsequently, Hainan Bank was successfully established on 20 15.

(2) Baoshang Bank: Due to long-term illegal occupation of bank funds by shareholders, serious internal operation problems and deterioration of external financing, Baoshang Bank was taken over on 20 19 and declared bankrupt on 20021,and the risk disposal work was basically completed.

Compared with the bankruptcy of Baoshang Bank, what are the similarities and differences in reasons and disposal methods?

Similarities:

(1) Shareholders are involved in violation of laws and regulations, and the equity management is chaotic.

The "Tomorrow Department" actual controller of Baoshang Bank illegally controlled 89% of the shares of Baoshang Bank by dispersing the shares of nearly 40 carrier companies and arresting local supervisors, which led to the long-term erosion of its asset quality and profits. Shareholders of "Zhongwang Department" of Liaoyang Rural Commercial Bank used illegal related party transactions to empty financial institutions.

(2) Its own business indicators touch the red line and its credit risk is high.

Both Baoshang Bank and Liaoyang Rural Commercial Bank have the characteristics of high non-performing loan ratio, poor asset quality, poor profitability and great pressure on capital replenishment. They have difficulties in operation, weak ability to replenish endogenous capital, and eventually go bankrupt.

(1) All of them will be taken over by other banks before entering the bankruptcy liquidation procedure, so as to ensure the continuity of the original banking business and protect the interests of creditors.

Similar to Shenyang Rural Commercial Bank undertaking the personnel, outlets and deposits of Liaoyang Rural Commercial Bank and Taizihe Rural Bank, Mongolian Commercial Bank and Shanghui Bank acquire and undertake the related businesses, assets and liabilities of Baoshang Bank, ensuring uninterrupted financial services of Baoshang Bank and safeguarding the interests of depositors and creditors. By undertaking first, the interests of depositors and employees of the bank can be separated, and finally the shareholders of the bank can absorb losses through bankruptcy liquidation.

Difference:

(1) Different takeover levels.

Liaoyang Rural Commercial Bank has not issued bonds and has no stock bonds since 2020, and its interbank liabilities are small; However, the interbank liabilities of Baoshang Bank exceed 300 billion yuan, involving about 700 counterparties across the country. If any of them cannot be paid, it may lead to inter-bank panic and liquidity risk, endangering the stability of financial markets. Therefore, China People's Bank and Bank of China Insurance Regulatory Commission took over Baoshang Bank, while Liaoyang Rural Commercial Bank and Taizihe Rural Bank were taken over by another rural commercial bank. The latter is more moderate.

It can be seen that the bank is seriously insolvent due to shareholders' reasons, and the bank's disposal will enter the bankruptcy stage, and whether there is interbank risk determines the disposal behavior and mode to a certain extent.

In addition to bank bankruptcy, there have been many mergers and acquisitions of small and medium-sized banks in recent years. Judging from the increasing number of mergers and acquisitions of small and medium-sized banks, the market-oriented exit mechanism of banks has been gradually improved and the reform of financial supply side has been further optimized. This policy encourages small and medium-sized banks in the region to speed up their restructuring, mainly focusing on the combination of "strength": first, many banks in the province merge into larger regional banks; Second, city commercial banks or rural commercial banks in the province with strong profitability and good operating conditions are looking for regional banks with relatively weak qualifications in the province.

1.3. What do you think of the impact of the Liaoyang Rural Commercial Bank incident?

In recent years, the credit risk and liquidity risk of some small and medium-sized banks have been gradually exposed, but the pace and intensity of final risk disposal still depend on the degree of problems and policy orientation.

What is the orientation of the current central bank's disposal policy? How to treat the risks of small and medium-sized banks?

According to the rating results of central bank's financial institutions in the fourth quarter of 20021,there are 3,997 small and medium-sized banks among 4,398 financial institutions, accounting for 9 1%. Among small and medium-sized banks, 10% of city commercial banks are high-risk institutions (assets account for 3% of all city commercial banks); Rural cooperative institutions (including rural commercial banks, rural cooperative banks and rural credit cooperatives) and rural banks have the highest risks, with 186 and 103 respectively, accounting for 5% and 7% of their assets respectively.

At the same time, the government has steadily promoted the risk disposal of high-risk small and medium-sized banks by increasing the disposal of non-performing assets, introducing qualified shareholders, absorbing mergers, restructuring and integration, and upgrading to standards.

The State Council Press Office held a press conference on the operation and development of the banking and insurance industry in the first half of 2023, and mentioned that "in the first half of this year, small and medium-sized banks disposed of 594.5 billion yuan of non-performing loans, which was118.4 billion yuan more than the same period of the previous year. Regulatory authorities also support mergers and acquisitions, optimize market layout, and enhance the development momentum of small and medium-sized banks. In particular, promote the risk resolution of small and medium-sized banks' one province, one policy' and' one line, one policy'. " And "accelerate the promotion of local governments to issue special bonds to supplement the capital of small and medium-sized banks. In the first half of the year, with the approval of the State Council, a quota of 654.38+003 billion yuan has been allocated to Liaoning, Gansu, Henan and Dalian. "

Considering the frequent chaos of shareholders' rights and interests in small and medium-sized banks, from 20 18 to 2020, the Bank of China Insurance Regulatory Commission launched a three-year special rectification of shareholders' rights and interests to standardize and improve shareholders' rights and interests management and corporate governance in small and medium-sized banks. We will increase penalties for outstanding issues such as illegal shareholding, manipulation of the normal operation of institutions, and transfer of benefits from related party transactions. More than 4,000 shareholders were restricted from voting and ordered to transfer more than 6 billion shares. More than 65,438+000 rural small and medium-sized banks that failed to rectify existing problems and new violations lowered their evaluation results.

In addition, the central bank accurately dealt with many risks of small and medium-sized banks, including dealing with the risks of contractor banks through receipt and acceptance, and breaking the rigid redemption in an orderly manner; Dealing with hengfeng bank risks by means of "local government capital injection and war restructuring"; Solve the risk of Jinzhou Bank by "online repair".

First, for financial institutions that have liquidity risks but have repaid their debts, they should try their best to promote "online repair" on the premise of providing qualified and sufficient collateral, and deposit insurance funds or central banks can provide liquidity support; For insolvent institutions, in principle, market discipline should be strict and market withdrawal should be implemented.

After undertaking, we found that on the whole, the disposal of small and medium-sized banks is mainly based on online repair. Although the premise of Liaoyang Rural Commercial Bank's bankruptcy disposal is similar to that of contractors, the premise of bankruptcy disposal is that it has no surviving financial market bonds and its interbank risks are controllable.

1.3. Summary

2. Summary of credit rating adjustment

This week, a total of 1 issuers and their bonds were tracked and rated.

1 issuer was downgraded (Zhongjing Xinhua Asset Management Co., Ltd.), and the rating was downgraded by multiple levels at one time.

3. Primary market: the circulation increased compared with last week, and the issue interest rate declined as a whole.

3. 1. Distribution scale

This week, non-financial enterprises issued short-term financing, bid winning, corporate bonds and corporate bonds totaling about 273.252 billion yuan, and the circulation increased compared with last week. The repayment scale is about 254,654.38+009 million yuan, and the net financing amount is about 1.9 1.43 million yuan. Among them, the issuance scale of urban investment bonds (classified by Wind) is144.462 billion yuan, the repayment scale is about106965438+04 billion yuan, and the net financing amount is about 37.548 billion yuan.

The weekly circulation of credit bonds increased, the total repayment increased and the net financing decreased. Compared with last week, the circulation of short-term financing decreased, the total repayment increased and the net financing decreased; Compared with last week, the issuance of lottery tickets increased, the total repayment amount decreased and the net financing amount increased; Compared with last week, the issuance of corporate bonds increased, the total repayment increased and the net financing decreased; The issuance of corporate bonds increased compared with last week, the total repayment amount increased, and the net financing amount increased.

Specifically, general short-term financing and ultra-short-term financing issued 946.65438+05 billion yuan, repaid 65.438+03.374 billion yuan, and the net financing was-396.5438+025 million yuan; The issuance scale of lottery tickets is 78.88 billion yuan, the repayment scale is 45.575438 billion yuan, and the net financing amount is 33.309 billion yuan. Last week, corporate bonds issued a total of 9.6 billion yuan, with repayment of 65.438+04.2/kloc-0.57 billion yuan and net financing of-46./kloc-0.50 billion yuan; Corporate bonds issued a total of 9,065.438+0.57 billion yuan, with a repayment of 60.583 billion yuan and a net financing of 29.574 billion yuan.

3.2. Issue interest rate

Judging from the issue interest rate, the issue guidance interest rate published by the Dealers Association has declined as a whole, and some of them remain unchanged, with the decline rate at all levels ranging from 0 to 6 BP. Specifically, in 1 year, all grades decreased by 0-6bp; During the three-year period, all grades will be reduced by 0-4bp; During the five-year period, the upgrading level decreased by 2-4 BP; During 7 years, the grade dropped by 3-4 BP; 10 year and above grade change-12- 1BP.

4. Secondary market: The turnover increased and the yield increased compared with last week.

The total turnover of inter-bank and exchange credit bonds was 6.2 trillion yuan, an increase over the previous period. In terms of classification, short-term inter-bank financing, medium-term bonds and corporate bonds were 65.438+07.5891billion yuan, 233.643 billion yuan and 20.376 billion yuan respectively, while corporate bonds and exchange corporate bonds were 29.297 billion yuan and 765.438+09 billion yuan respectively.

4. 1. Interbank Offered Market

The overall yield of interest rate products is all upward; The yield of credit bonds went up as a whole and down partially; Credit spreads have expanded as a whole, while some spreads have narrowed; All kinds of credit rating spreads have narrowed overall and expanded locally.

The overall yield of interest rate products has all gone up. Specifically, the yield curve of national debt increased by 7BP to 1 .79% in1year, 4BP to 2.26% in three years, 7BP to 2.44% in five years, 5BP to 2.63% in seven years and 6BP to 2.64% in1year.

The yield of credit bonds went up overall, and some went down. Specifically, the short-term bill yield curve 1 year goes up by 3-7BP, 3-year goes up by 4-8BP, and 5-year goes up by 2-5bp. The yield curve of corporate bonds goes up by 5-8BP in three years, 4-6BP in five years and 4BP in seven years. The yield curve of urban investment bonds goes up by 4-8BP in three years, -2-6BP in five years and -3- 1BP in seven years.

The yields of financial bonds all fell. Specifically, the yield curve of tier 2 capital bonds of commercial banks is 2- 10BP in 0 years, 9- 14BP in 3 years and 14- 17bp in 5 years. The yield curves of open-end capital bonds (exercise) of commercial banks are 1 year, 5- 1 1BP, 3-year, 5- 16BP, 5-year and 6- 17BP.

The yields of financial bonds have all gone up. Specifically, the yield curve of tier 2 capital bonds of commercial banks 1 year goes up by 4-8BP, 6- 1 1BP in three years and 3-7bp in five years. The yield curve of commercial banks' non-fixed-term capital bonds (exercise) is 1 year, 4-7BP for each grade, 5- 1 1BP for each grade for three years and 4-6BP for each grade for five years.

The overall yield of interest rate products is all down; The yield of credit bonds all went down; Credit spreads have narrowed overall and expanded locally; All kinds of credit rating spreads have expanded as a whole, and some have narrowed.

Credit spreads narrowed overall and expanded locally. Specifically, the yield curve of short-term and medium-term bills changes by -3- 1bp in 0-year, rises by 1-5BP in 3-year, and drops by 2-5bp in 5-year. Corporate bond yield curve: three-year credit spreads of all grades are enlarged 1-4BP, five-year credit spreads are reduced by 2-4BP, and seven-year credit spreads are reduced by 2BP. The yield curve of urban investment bonds shows that the three-year credit spreads at all levels have increased by 1-5BP, the five-year credit spreads have decreased by 1-9BP, and the seven-year credit spreads have decreased by 4-8BP. The yield curve of tier-2 capital bonds of commercial banks is 1-5bp, and the credit spreads of all grades decrease 1-5bp in three years and 1-4bp in five years. The yield curve of commercial banks' non-fixed-term capital bonds (exercise) is 1 year, and the credit spreads of all grades decrease by 2-5BP, 3 -3- 1BP and 1-3BP respectively in five years.

All kinds of credit rating spreads have narrowed overall and expanded locally. Specifically, the yield curve of short-term and medium-term bills is 1 year AA, AA and AA- Compared with AAA-level spreads, the three-year spreads are reduced by 0-4BP and the five-year spreads are reduced by 0-3 BP; The 3-year AA, AA and AA- changes by -2- 1BP compared with AAA, the 5-year AA spreads expand by 0-2BP, and the 7-year AA spreads remain unchanged. Tier 2 capital bonds of commercial banks 1 one-year grade spread decreases 1-4BP, three-year grade spread changes -5- 1BP, and five-year grade spread decreases1-2bp; The 0-year grade spread of open-ended capital bonds (exercise rights) of commercial banks decreased by 0-3BP, the 3-year grade spread decreased by 2-4BP, and the 5-year grade spread changed by -2- 1BP.

4.2. Foreign exchange market

Trading activities in the corporate bond market and the exchange corporate bond market have increased. The net price of corporate bonds rose more and fell less, and the net price of corporate bonds rose more and fell less. Generally speaking, the net price of corporate bonds increased by 237, while the net price decreased by163; The net price of corporate bonds rose by 249, while the net price fell by 192.

5. Appendix

Wind risk indication

Financial risk and credit risk events of small and medium-sized banks frequently occur, exceeding expectations.

-End-

Securities research report: "How to see Liaoyang Rural Commercial Bank enter bankruptcy proceedings? 》

This article comes from the financial sector.

Related Q&A: Don't banks pay back more than 500,000 yuan? The statement of 1.50 million yuan comes from the deposit insurance system. A single depositor can enjoy insurance compensation with principal and interest not exceeding 500,000 yuan in a bank. That is to say, if Zhang San deposits 6,543,800 yuan in the bank and the bank goes bankrupt, the insurance company is only responsible for paying 500,000 yuan, and the remaining principal and interest need to be paid to the customer in proportion from the assets liquidated by the bank. 2. Bank financing is not a deposit, so it is not protected by the deposit insurance system. Once the bank goes bankrupt, the customer's financial management can only be paid in proportion from the bank's liquidation property. This sum will basically not reach the financial principal, because if the principal can be paid, it will not fall into bankruptcy. 3. Financial management is risky and investment needs to be cautious. Wealth management income is obviously higher than deposits, so the risk is definitely higher than deposits. If someone tells you that banks have high financial returns but low risks, just like deposits, you can draw a conclusion that they are either unprofessional or fooling you. You are thinking about several interest points, and he is thinking about your principal. In most cases, banks will compensate depositors for all financial losses, except for a few individual cases: banks that have not purchased deposit insurance will not pay. At present, there are more than 4,600 banks in China, of which 4,000 banks have participated in the deposit insurance regulations and subscribed for deposit insurance premiums, and more than 600 banks have not participated. Therefore, before you deposit money in the bank, you should check whether the bank has deposit insurance. If so, depositors' deposits are absolutely safe as long as they are within 500 thousand. If the bank goes bankrupt, the bankrupt bank will hand over the creditor's rights and debts to the takeover bank. Therefore, if you owe debts such as bank mortgage loans, consumer loans and operating loans, you still have to repay them according to the contract. For you, this is just another person to pay off debts. Legal basis: Regulations on Deposit Insurance Article 2 Deposit banking financial institutions such as commercial banks, rural cooperative banks and rural credit cooperatives established in People's Republic of China (PRC) (hereinafter referred to as insurance institutions) shall participate in deposit insurance in accordance with the provisions of these Regulations.