[NTD News October 16, 2021, Beijing time]Recently, the Chinese Communist Party’s regulatory authorities imposed high fines on a number of private banks, setting a record for the highest fines for private banks in China. A few days ago, the official media issued a document criticizing private banks for transferring benefits to related parties and other violations, calling for alertness to the “barbaric growth” of some private banks. The financial circles believe that private banks have become a new target for rectification.
On October 15, the Chinese Communist Party’s official media “Economic Daily” published a signed commentary, emphasizing the need to “be alert to the brutal growth of some private banks.”
The article criticized the operation of some private banks in China as “seriously contrary to their original intentions.” Not only did they fail to provide financial support to small, medium and micro enterprises and the “agriculture, rural areas, and farmers”, they “blindly block large households and spread the pie” and plant risks. Hidden dangers.
The article also specifically mentioned that private banks transfer benefits to related parties and illegally lend to real estate projects. Some “three meetings and one level” (shareholders meeting, board of directors, board of supervisors and senior management) have not performed their duties in place, and the main sponsors, especially the first A large shareholder is “strongly and excessively involved in bank management” and other chaos. It is believed that the reasons for these chaos are not only related to the inadequate supervision and profit-seeking nature of private capital, but also to some of the disadvantages of private banks “innate deficiency”, but “innate deficiency” is not an excuse for illegal operations. It is required to strengthen corresponding supervision and introduce more targeted solutions to prevent systemic and regional financial risks.
Recently, the debt crisis of private real estate companies in China’s Evergrande and Fantasia has exploded. In related reports, the Chinese Communist Party’s official media attributed the related problems to illegal borrowing by private capital banks. At the same time, in September, regulators imposed hefty fines on a number of private banks. The financial circles believe that private banks may have become the target of the next round of rectification by the authorities.
According to Caixin.com, since September this year, Shanghai Huarui Bank, Liaoning Zhenxing Bank, and Chongqing Fumin Bank have successively received large fines issued by regulatory agencies. The reasons are all related to the illegal transfer of benefits to related parties. Among them, Chongqing Fumin Bank was fined 8.5 million yuan (the same hereinafter), which is the highest value in the history of a private bank. Chairman Zhang Guoxiang, President Chu Longchun, and Vice President Zhong Ziming were also fined 500,000 yuan and 30 yuan respectively. Shanghai Huarui Bank was fined 5.2058 million yuan, the second highest fine; Liaoning Zhenxing Bank was fined 1.4 million yuan, the first fine since the bank opened.
The report of Caijing.com on the 15th pointed out that in September this year, the Banking and Insurance Regulatory System issued a total of 201 fines against banking institutions, with a total fine of 83.71 million yuan, penalties for 95 institutions and 195 persons.
In terms of personal penalties, the China Banking and Insurance Regulatory Commission issued a sharp increase in penalties for “prohibition of working in the banking industry” in September. According to the financial analysis of Caijing.com, a total of 24 people were banned from business, a 667% increase from August, and 8 of them were fined and banned from working in the banking industry for life. Next, 49 people were fined and 164 people were given warnings.
The report pointed out that the number of fines received by Bank of China in September was almost the same as the previous month, but the amount of fines increased by 40% compared to August. Among them, private banks once again “collectively received regulatory attention” due to various violations, and related-party transaction management is the “hardest hit area” for private banks. As a result, private banks are frequently issued millions of large fines by regulatory agencies, indicating that the authorities have taken the banking industry seriously. The supervision of the country has become stricter.
In response to the above situation, Luo Jiacong, an economist who was the chief economist of the Hong Kong branch of Bank of Communications, said in an interview with Radio Free Asia on the 15th that Chinese people speculate in real estate, and most of the loans from private banks are related to real estate. The Beijing authorities have always hoped to reduce The real estate industry has high leverage risks, but the current serious real estate debt crisis in China has put the authorities in a “dilemma” and dare not act rashly.
Luo Jiacong said: “It has been talking about reducing leverage for a long time, but it also knows that now that the bubble is blown so hard, it will die as soon as it is reduced, just like Evergrande.”
He further pointed out that the potential problem of the Beijing authorities’ rectification of certain real estate tycoons is that once these companies fail, it will bring about a large number of employees unemployment and other collateral effects.
(Reporter Li Ming Comprehensive Report / Chief Editor: Lin Qing)
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