The contractor bank, which was once rated by the regulators as one of the seven least risky city commercial banks in China and has the reputation of serving the benchmark of small and micro enterprises, was taken over on Friday because of its serious credit risk. It became the first domestic bank to be taken over in 20 years after Hainan Development Bank. It also brought back the difficult survival problems of many small and medium-sized banks after their brutal growth in the past few years. Place it under the spotlight.
Chaotic ownership structure and corporate governance, illegal lending, asset-liability inversion and deterioration of asset quality are common failures of many small and medium-sized banks. Mergers and reorganizations of high-risk financial institutions and even bankruptcy exit have made it impossible to continue "talking on paper" in the complex and severe economic and financial situation. Despite the escort of the deposit insurance system, the risk of orderly liquidation is not a small pressure for regulators.
"Contractor banks have the particularity that is well known in the market, as well as the common problems of the development of small and medium-sized banks in the past few years. In the downturn of the economy, some risk exposure is normal. Now we need to make the deposit insurance regulations real and make them move. We also need to clarify the main body of the actual operation of the deposit insurance fund to deal with the risks effectively. A regulatory official told Reuters.
A senior executive of a local branch of a large state-owned bank also pointed out that once small and medium-sized banks become shareholders'ATMs and expand blindly, the bank's profitability declines in the process of downsizing, the contradictions that they have covered up will accelerate to surface. The balance sheet may look healthy, but many of the problem assets held on behalf of them hang out of the balance sheet, which is unknown.
According to the announcement made by the Central Bank and the Banking Insurance Regulatory Commission on Friday, in view of the serious credit risk of the contractor banks, the CBRC decided to take over the contractor banks from May 24 for a period of one year. But the announcement did not specify the specific credit risk.
Another person in the financial market department of a joint-stock bank said that the risk of the contractor bank had begun to show up more than half a year ago. "The contractor was rated AA + but the price of the same deposit period was higher than the same rating of 30BP (base point). One of my judgments at that time was that the bank was trying to borrow money in order to maintain liquidity."
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