The China Banking Regulatory Commission issued three articles in a row over the weekend, and these things can’t be done in the future.
Xinhuanet Beijing, January 8 (Yan Yuxi) On the first weekend of 2018, the China Banking Regulatory Commission issued three articles in succession, which the market interpreted as a signal of strong supervision and will continue in the New Year. These three policy documents are respectively Management Measures for Entrusted Loans of Commercial Banks, Interim Measures for Equity Management of Commercial Banks, and Management Measures for Large Risk Exposure of Commercial Banks (Draft for Comment), which are aimed at behaviors such as chaos of bank shareholders and chaos of shadow banks, and also reflect the idea of penetrating supervision.
Entrusted loan management: make a "negative list" of the use of funds.
On January 6th, China Banking Regulatory Commission issued the Measures for the Administration of Entrusted Loans of Commercial Banks (hereinafter referred to as the Measures). This is considered to be the first time that the entrusted loan business has been systematically regulated after the Notice on Issues Related to Commercial Banks’ Entrust Loan Business in 2000, in which a clear "negative list" has been made for the business orientation of entrusted loans, the responsibilities of all parties, the sources and uses of funds for entrusted loans, etc.
The entrusted loan of commercial banks is a typical multi-layered nested channel business. In recent years, the entrusted loan business of commercial banks has developed rapidly, which has played a positive role in serving the development of the real economy. However, due to the lack of unified institutional norms, there are also certain risks.
It is clear in the Measures that commercial banks shall not identify borrowers on behalf of their clients, participate in loan decision-making and provide various forms of guarantees; The client shall determine the borrower of the entrusted loan by himself, review the borrower’s qualification and loan items, and bear the credit risk of the entrusted loan.
As for the source of funds for entrusted loans, commercial banks may not accept entrusted loans from other people’s funds, bank credit funds, various special funds with specific purposes, other debt funds and funds whose sources cannot be proved.
With regard to the use of funds for entrusted loans, the funds shall not be used for production, operation or investment in fields and uses prohibited by the state, nor for investment in bonds, futures, financial derivatives, asset management products, etc., nor for registered capital, registered capital verification, equity investment or capital increase and share expansion.
Many people in the industry told reporters that the introduction of this new regulation is in line with the previous new regulations on asset management and the Notice on Regulating Banking and Credit Business, thus guiding the entrusted loan funds to return to their original sources.
In response to a reporter’s question, the China Banking Regulatory Commission said that the formulation of the Measures aims to make up for the shortcomings of supervision, fill the gap in the entrusted loan supervision system, and provide an institutional basis for commercial banks to handle entrusted loan business. In addition, in order to strengthen risk management, the Measures require commercial banks to improve the internal management system and process of entrusted loan business, strictly control risk measures, and not to carry out business beyond the duties of the trustee, and at the same time strengthen relevant regulatory requirements.
Formulate measures for the management of large-value risk exposure of banks
Credit concentration risk is one of the most important risks faced by banks. On January 5th, China Banking Regulatory Commission issued the Management Measures for Large Risk Exposure of Commercial Banks (Draft for Comment), which refers to inter-bank business.
Three factors are mainly considered in setting regulatory standards: first, convergence with current regulatory requirements; second, pressure on domestic banks to meet standards; and third, reference to international regulatory standards.
For single customers who are not in the same trade, the Measures reiterated the requirement of the Commercial Bank Law that loans should not exceed 10% of capital, and stipulated that all credit risk exposures including loans should not exceed 15% of Tier 1 capital.
For non-affiliated customers, the Measures stipulate that their risk exposure shall not exceed 20% of Tier 1 capital. Non-affiliated customers include group customers and economically dependent customers. The current Guidelines for Risk Management of Group Customer Credit Business of Commercial Banks stipulates that the credit balance of group customers shall not exceed 15% of the bank’s capital.
For interbank customers, according to the regulatory requirements of the Basel Committee, the Measures stipulate that their risk exposure shall not exceed 25% of Tier 1 capital. Considering that the interbank risk exposure of some banks exceeds the regulatory standards stipulated in the Measures, the Measures set a three-year transition period for the risk exposure of interbank customers.
In response to a reporter’s question, the China Banking Regulatory Commission said that the Measures have raised the regulatory requirements of a single bank on the risk exposure of a single interbank customer, which is consistent with the current policy orientation of dealing with the chaos in the same industry, and helps to guide banks to return to their original sources, focus on their main business, and weaken their dependence on interbank business. The Measures clarify the upper limit of the total amount of credit granted by a single bank to a single enterprise/group, further standardize the interbank business, help guide banks to invest more funds in the real economy, especially change the phenomenon of "hitchhiking" and "relying on large households" in the process of credit granting, improve the credit availability of small and medium-sized enterprises and improve the efficiency of credit resource allocation.
Standardize the behavior of shareholders of commercial banks
On the evening of January 5th, the CBRC issued the Interim Measures for Equity Management of Commercial Banks (hereinafter referred to as the Measures). On the basis of the public consultation draft issued at the end of last year, it continued to strengthen the regulation of major shareholders’ behaviors, focusing on solving the problems of major shareholders abusing their rights and interfering in bank operations.
The number of shares in commercial banks is limited. It is clearly stipulated in the Measures that the number of shares in commercial banks by the same investor, its related parties and concerted parties as major shareholders shall not exceed two, or the number of holding commercial banks shall not exceed one.
How to define major shareholders? The Measures point out that major shareholders are defined as "shareholders who hold or control more than 5% of the shares or voting rights of commercial banks, or who hold less than 5% of the total shares but have a significant impact on the operation and management of commercial banks".
The Measures require major shareholders to explain the ownership structure to commercial banks and regulatory authorities layer by layer until the actual controller and ultimate beneficiary, and limit the number of major shareholders participating in commercial banks; It is required to establish a negative list of major shareholders’ behaviors, and major shareholders may not transfer their shares within five years from the date of acquiring shares.
The China Banking Regulatory Commission said that the Measures have established and improved a "trinity" penetrating regulatory framework from shareholders, commercial banks to regulatory authorities, focusing on solving problems such as invisible shareholders and share holding. The comprehensive, true and accurate information of shareholders is the basis of equity management of commercial banks. In response to violations such as invisible shareholders and share holding, the Measures clarify the responsibility of major shareholders to submit information, the responsibility of commercial banks to verify information, and the final responsibility of the regulatory authorities.
It is worth noting that the Measures also restrict the holding of bank shares by financial products. Article 25 of the Measures stipulates that "financial products can hold shares of listed commercial banks, but the total shares of financial products controlled by a single investor, issuer or manager and their actual controllers, related parties and concerted parties in the same commercial bank shall not exceed 5% of the total shares of the commercial bank. The major shareholders of a commercial bank shall not hold shares of the same commercial bank with financial products issued, managed or controlled by other means ".