Attention these three types of institutions!China Banking and Insurance Regulatory Commission issued a document to “dismantle the bomb” of high-risk financial institutions to refine their recovery and disposal plans

Original title: Pay attention to these three types of institutions!The China Banking and Insurance Regulatory Commission issued a heavy document to “de-bomb” high-risk financial institutions, and detailed recovery and disposal plans

Summary

[Attention these three types of institutions! China Banking and Insurance Regulatory Commission issued a document to refine the recovery and disposal plan of high-risk financial institutions]Recently, the China Banking and Insurance Regulatory Commission formulated the Interim Measures for the Implementation of the Recovery and Resolution Plan of Bancassurance Institutions, which will be implemented on the date of promulgation. The “Measures” are based on guiding bancassurance institutions to take precautions and take precautions, and plan in advance the response measures under major risk situations from the system, which is conducive to consolidating the main responsibilities and shareholder responsibilities of financial institutions, strengthening the awareness of prudent operation of financial institutions, and continuing to improve Ability to prevent and defuse risks. (Broker China)

In the past three years, while “dismantling” high-risk financial institutions, the regulatory authorities have also continuously improved the legal system for risk resolution and disposal of high-risk financial institutions in practice to make up for the shortcomings of the system.

Recently, the China Banking and Insurance Regulatory Commission formulated the “bankInsuranceThe Interim Measures for the Implementation of Institutional Recovery and Disposal Plans (hereinafter referred to as the “Measures”) shall come into force on the date of promulgation. “Methods” based on guidancebankInsuranceInstitutions take precautions and take precautions before they occur, and plan the response measures under major risk situations in advance from the system, which is conducive to consolidating the main responsibilities and responsibilities of financial institutions.shareholderResponsibility, strengthen the awareness of prudent operation of financial institutions, and continue to improve the ability to prevent and defuse risks.

The “Measures” draws on international financial regulatory good practice standards, fully considers my country’s national conditions, and helps to complement the shortcomings of the system, further improve the financial risk prevention, early warning, handling, and accountability systems, maintain financial security and stability, and effectively protect the financial sector. The legitimate rights and interests of consumers.

The “Measures” has five chapters and 30 articles, including general provisions, restoration plans, disposal plans, supervision and management, and supplementary provisions.At the same time, the annexes to the Measuresbank、InsuranceThe company provides examples of recovery plans and disposal plans.

In terms of the scope of application, “big to fail” and “small but easy to fail” are the “pain points” that should be considered and dealt with in the recovery and disposal plan. The three types of bancassurance institutions that meet the requirements should formulate recovery and recovery measures in accordance with the requirements of the Measures. Disposal plan.

Learn from international experience and take precautions

After the 2008 international financial crisis, the Financial Stability Board and major economies have taken the recovery and resolution plan as an important measure to improve the resolution framework, prevent and control the negative externalities and moral hazards of financial institution failures, and achieve orderly resolution.

The Basel Committee on Banking Supervision adopted a clear crisis management, recovery and resolution framework as a prerequisite for effective bank supervision in the “Core Principles for Effective Banking Supervision”; the Financial Stability Board clearly stipulated the recovery in the “Core Elements of Effective Banking Management” And the principles and specific elements of the disposal plan. Major economies such as the United States, the European Union, the United Kingdom, Australia, Switzerland, Singapore, and Hong Kong have all formulated regulatory guidelines for recovery and disposal plans.

Since 2011, the financial supervision department has guidedBank of China、ICBC、Agricultural Bank of China、Construction BankHeping Group formulated and updated recovery and disposal plans, and successively put forward regulatory requirements for trust companies and private banks to formulate comprehensive recovery and disposal plans. In order to fully learn from the good practices of international supervision and timely sum up the useful experience of preventing and resolving financial risks, the China Banking and Insurance Regulatory Commission formulated the “Measures.” The “Measures” will be publicly solicited from the public from February 26 to May 25, 2021, and will be formally issued in the near future after further improvement based on the feedback.

The formulation of the “Measures” is to complement the shortcomings of the supervision system and to improve the uniformity and effectiveness of supervision. It is also to strengthen the concept of prudent operation of financial institutions and enhance the ability to prevent and defuse financial risks.

The relevant person in charge of the China Banking and Insurance Regulatory Commission stated that, on the one hand, it is to complement the shortcomings of the supervisory system and improve the uniformity and consistency of supervision. At present, the regulatory authorities have had preliminary practice in guiding financial institutions to formulate recovery and disposal plans, and have accumulated some practical experience. However, it should also be noted that the existing regulatory regulations on recovery and disposal plans are relatively scattered, and the content is relatively principled. In terms of actual operation, it is necessary to refine and unify standards, and strengthen guidance and review requirements. At the same time, it is necessary to expand the scope of applicable institutions, implement the concept of “layered supervision”, and further standardize and institutionalize.

On the other hand, it is to strengthen the concept of prudent operation of financial institutions and enhance the ability to prevent and defuse financial risks. The formulation of recovery and resolution plans is conducive to strengthening financial institutions’ crisis awareness and crisis response capabilities, implementing the institution’s main responsibilities and shareholder responsibilities, and integrating prudent business concepts throughout the entire business process to truly “prevent problems before they occur.” Through the recovery and disposal plan, the response and disposal measures in the case of major risks are planned in advance, and the early judgment and treatment of possible obstacles are also conducive to consolidating the supervisory responsibilities of the financial regulatory authorities and the territorial responsibilities of local governments to achieve rapid and orderly disposal. Maintain financial stability.

Three aspects to clarify the scope of application

In terms of the scope of application, “big to fail” and “small but easy to fail” are both “pain points” that should be considered and dealt with in recovery and treatment plans. Specifically, bancassurance institutions that meet the following conditions should formulate recovery and disposal plans in accordance with the requirements of the Measures:

(1) Commercial banks, rural credit cooperatives, and other financial institutions that absorb public deposits, with on- and off-balance sheet assets (denominator of leverage ratio) reaching 300 billion yuan (including equivalent foreign currencies) and above after adjustments (domestic and overseas) according to the consolidated statement at the end of the previous year Institutions and financial asset management companies, financial leasing companies;

(2) Insurance group (holding) companies and insurance companies whose total assets on the balance sheet at the end of the previous year (domestic and overseas) reached 200 billion yuan (including equivalent foreign currencies) and above according to the consolidated statement;

(3) Although the above conditions are not met, other bancassurance institutions that should be designated by the China Banking and Insurance Regulatory Commission and its dispatched offices to formulate recovery and disposal plans based on business characteristics, risk status, spillover effects and other factors.

If both the bancassurance institution and its holding group meet the above conditions, they should generally formulate recovery and disposal plans separately under the overall planning of their holding group. However, if the insurance group (holding) company and its subsidiary insurance companies meet the above conditions, in principle, the insurance group (holding) company shall uniformly formulate a recovery and disposal plan.

At the same time, Article 4(3) of the “Measures” stipulates that the supervisory authority can designate institutions that need to formulate recovery and disposal plans based on factors such as business characteristics, risk status, and spillover effects. For small and medium financial institutions, the regulatory authorities pay more attention to flexibility, pertinence and matching in application, especially the actual operating conditions and regulatory resources of the institutions. The regulatory authority will clarify the small and medium-sized institutions that should formulate recovery and disposal plans step by step, batch by batch, and phases, and give a certain grace period as appropriate. Small and medium-sized institutions can also appropriately simplify the specific elements of the restoration and disposal plan, and appropriately extend the frequency of updates.

Separately refine the recovery and disposal elements

The “Measures” clarify the four principles of law and order, self-help-oriented, prudent and effective, and division of labor, emphasizing orderly recovery and disposal, protecting the public interest, and maintaining financial stability.

First of all, the “Measures” strictly implement the principle of “statutory powers” and clearly stipulate that restoration and disposal plans should be formulated and implemented in accordance with statutory authority and procedures. The “Measures” stipulate that the disposability evaluation should focus on the evaluation of whether the disposal mechanism and disposal tools are legal and feasible. The “Measures” emphasizes that when the implementation of the disposal plan is initiated, the legal authority and risk disposal responsibilities should be followed, and regulatory measures such as removing obstacles to disposal should be taken in accordance with the law to effectively safeguard the legitimate rights and interests of all parties and the public interest.

How to develop a recovery and disposal plan? The Measures stipulate that the recovery and disposal plan should take into account the specific environment in which the bancassurance institution operates, fully reflect the nature and scale of the institution, as well as the complexity, relevance and substitutability of the business, etc., by sorting out the risk areas and weaknesses of the institution, it is effective Improve transparency, reduce complexity, improve self-rescue ability, and prevent systemic risks.

Recovery and resolution plans should separately consider the stress scenarios of a single bancassurance institution or its holding group and the entire financial system, and consider the potential impact of cross-market, cross-industry, and cross-border risk transmission in crisis situations. If necessary, bancassurance institutions should adjust the assumptions of stress test scenarios or add additional stress scenarios.

In addition, bancassurance institutions should establish an information management system that is compatible with the recovery and disposal plan to ensure that relevant information required for recovery and disposal plan formulation, approval, drills, and disposability assessment can be collected and submitted in a timely manner.

The goal of the recovery plan is to enable bancassurance institutions to take relevant measures to resume normal operations under major risk situations.

The main content of the recovery plan should include but not limited to: basic overview of business conditions, organizational structure, governance structure for implementing the recovery plan, key functions, core business, identification of important entities, stress testing, trigger mechanism, recovery measures, communication strategies, recovery plan Implementation obstacles and improvement suggestions, etc.

The goal of the resolution plan is to enable the bancassurance institution to obtain rapid and orderly disposal when it is unable to continue operations or implement the recovery plan after the implementation of the recovery plan, and to maintain key businesses and services during the disposal process. Uninterrupted to maintain financial stability.

The main contents of the resolution plan recommendations should include but are not limited to: basic overview of operating conditions, organizational structure, etc., the governance structure for the implementation of the resolution plan, key functions, core business, identification of important entities, sources of funds for the resolution and funding arrangements, and the requirements for the implementation of the resolution plan Information and data, the implementation plan of the resolution plan, communication strategies, the impact of the resolution on the local and macroeconomic and financial, the resolution of implementation obstacles and improvement suggestions, etc.

It should be noted that the China Banking and Insurance Regulatory Commission and its dispatched agencies shall, in conjunction with relevant departments, conduct regular resolvability assessments, including but not limited to the following: whether the resolution mechanism and resolution tools are legal and feasible, whether the sources of funds for disposal and the funding arrangements are clear, and whether the bancassurance institution Whether the key function identification method is reasonable, whether the key function can continue to operate in the disposal, whether the organizational structure and management information system can support the disposal, whether the coordination and cooperation of disposal and the information sharing arrangement are feasible, whether the disposal measures are well matched with the actual situation, Whether the disposal measures taken at a certain stage affect the effectiveness of other disposal measures, and the impact of disposal on the local and macroeconomic finances, etc.

The China Banking and Insurance Regulatory Commission and its dispatched offices may adjust the update frequency of the resolution plan and implement differentiated management based on the resolvability assessment.

Improve the mechanism to protect the rights and interests of financial consumers

At present, my country’s economic and financial operations are generally stable, but there are still many uncertain factors. The orderly handling of risks from high-risk financial institutions is an important part of preventing financial risks.

What sort of order and principles should be followed when dealing with high-risk financial institutions? ICBC Vice President Wang Jingwu once said that he insisted on advancing the clearance of risks, but did not proactively detonate risks. According to the bottom-line thinking, he should do a good job of handling and underpinning plans.For those who can maintain their operations by taking self-rescue measures, try to defuse the risks through “online repair”; for those who cannot maintain self-rescue, the regulatory authorities will intervene in a timely manner and try to passReorganizationReduce losses and reduce market shocks; those who do not meet the conditions for reorganization shall withdraw from the market in accordance with the law and strictly enforce market discipline.

The relevant person in charge of the China Banking and Insurance Regulatory Commission stated that at present, my country has established a financial public safety net for systematic protection of financial consumers. Since its implementation in 2015, the deposit insurance system has effectively promoted the stable operation of banking institutions and provided depositors with more timely and comprehensive protection. Insurance protection established in 2008fundThe system is more detailed and comprehensively protects the legitimate rights and interests of policyholders. In recent years, in the practice of disposing of high-risk bancassurance institutions, individual resident savings deposits and insurance policies have been fully and comprehensively protected.

The “Measures” embodies the protection of the rights and interests of financial consumers. The “Measures” emphasizes “division of labor and cooperation”, clearly sharing recovery and disposal plans with the People’s Bank of China, deposit insurance institutions, etc., and coordinating all parties to provide support and guarantees for the formulation and implementation of recovery and disposal plans.

The “Measures” emphasizes “self-help-oriented” and clarifies the main responsibility and shareholder responsibilities for risk response, which is conducive to integrating risk awareness into the corporate governance system, preventing excessive risk-taking “risk behavior”, and preventing excessive reliance on public assistance “moral hazard” “It is conducive to promoting the prudent and stable operation of financial institutions and continuously improving the level of risk management. “Everything is prepared in advance, and if not, the measures are eliminated.” The Measures require all parties to plan in advance restoration and disposal measures, reserve resources for restoration and disposal, and estimate the external impact of restoration and disposal, making restoration and disposal more orderly and Prudence and effectiveness will help protect the rights and interests of financial consumers and the public interest of society, and maintain financial security and stability.

(Article Source:BrokerageChina)

(Editor in charge: DF407)