In the face of the Shanghai steel trade credit risk incident, under the guidance of the China Banking Regulatory Commission, the Shanghai Banking Regulatory Bureau, collective decision-making, objective judgment, early warning, flexible disposal, to prevent the continuous spread of credit risk, the brakes, vivid from the perspective of regulators Interpretation of the responsibility and mission of escorting the real economy. In the later stage of the disposal work, Liao Wei focused more on the reflection and improvement of the Shanghai banking industry.
In the late spring and early summer of 2014, after the rain, it was cool. At the Shanghai Banking Regulatory Bureau in Pudong New Area, Director Liao Wei just finished the busy schedule of the morning.
In Shanghai, where the steel trade credit crisis first broke out, after more than two years of early warning, resolution and disposal, the Shanghai Banking Regulatory Bureau initially achieved the goal of deleveraging and maintaining a low non-performing loan ratio, and realized the credit risk of steel trade in stages. "Soft landing." However, the unscientific assessment system and extensive management and management culture of the banking industry exposed in the steel trade risk are also very worrying. The most talked about in the interview was the reflection and improvement of the banking industry problem, because he knew that the problems exposed by the steel trade credit crisis must learn from the lessons and improve it. The kind of "recurring mistakes" is the bank. The most important need to avoid industry risk management.
Compared with the traditional "parent" and "athlete" style of supervision, Liao Wei believes that financial regulators should play the role of "referee" and "night watchman". In Shanghai, a frontier of China's financial industry that respects market rules and values ​​the spirit of the contract, he is more inclined to exercise supervisory functions through the market. The Shanghai banking industry adhered to the principle of marketization in risk disposal, actively explored the market-based disposal mode, and at the same time gave full play to the coordination and backup functions of government departments, strived to preserve and enlarge the cake, maximized mutual benefit, and broke the government's billing and market. The unilateral rights-definition formula has explored an effective disposal path for similar incidents across the country.
Speaking of the future of Shanghai's banking industry, Liao Wei is full of confidence. "After this steel trade incident, the quality and risk management capabilities of Shanghai Bank employees will be greatly improved. If you make mistakes, you should learn from mistakes. In turn, it will promote the development and transformation of the Shanghai banking industry, enhance the professionalism of Shanghai bankers, and enhance Shanghai's international financial competitiveness."
Steel trade credit risk lessons and profound bank transformation and development have a long way to go
Our reporter: Although the steel trade credit crisis in this round of Shanghai and even the Yangtze River Delta has stabilized, the series of deep-seated contradictions exposed are thought-provoking. What do you think of this?
Liao Wei: Yes, after the steel trade credit risk occurred, the Shanghai Banking Regulatory Bureau reflected on the causes of the credit risk of steel trade and summarized the lessons. In my opinion, the macroeconomic fluctuations are only the incentives for the credit risk of steel trade. The steel trade enterprises, industry associations, warehousing agencies, commercial banks and other steel trade credit participants participate in the dishonesty behavior, moral hazard, and commercial bank performance appraisal system. The distortion, the failure of wind control and the loss of control are the root causes of the credit risk of steel trade, and these come from the extensive development model of China's banking industry during the transition period.
Our reporter: So, to stop the recurrence of similar risks, what lessons do you think commercial banks should learn from and improve?
Liao Wei: Banks should stop the similar risks from happening again. First, they should change their business methods. They must not give up risk management, weaken personnel management, and sacrifice process monitoring because they compete for customers, deposits and market size. They must always adhere to the basics of commercial banking operations. The principle of law and prudence; secondly, it should improve the risk management of bulk commodity financing, prudently promote the pledge of credit products of movable assets, and improve the problems of these products and the lack of risk control; once again, strengthen the implementation of various rules and regulations, especially It is necessary to strengthen the implementation of the "Three Laws and One Guidelines", do a good job of credit three investigations, and change the bank's extensive credit management culture. Fourth, it is necessary to strengthen the professional ethics education of employees at all levels of the bank, strengthen employee behavior management, and reduce from the source. The emergence of moral hazard; finally, the most important thing is to cure the problem, that is, to improve unscientific performance appraisal indicators, and urge banks to implement differentiated operations, truly form their own comparative advantages and enhance their core competitiveness.
Our reporter: The banking industry has begun to reflect on and improve the various problems exposed by the steel trade credit risk. So, what do you think is the biggest difficulty in improving your work?
Liao Wei: What we just talked about is the lack of banking system and the fallacy of ideas exposed by the steel trade incident. We should also see that in the early days of reform and opening up, we did not understand the modern banking industry and could only imitate and imitate the international advanced experience. After the baptism of reform and opening up, the realization of reorganization and listing, and the study of international standards over the years, today, our banking industry is familiar with the basic concepts of modern credit business management, and the international advanced concept can be regarded as synchronized, and the system construction is also in progress. complete.
However, in the process of handling and summarizing the steel trade credit crisis, we found that the biggest problem now lies in the specific implementation of systems, policies and regulations. This is the biggest problem that our banking industry needs to solve now. A major focus of banking reform.
To solve this problem, we must require the bank to strictly follow the rules and regulations within the industry from top to bottom, and treat the same people according to the rules. It must not be different from person to person. In addition, it must be strictly managed. Generally speaking, it is "who swears at my bank." I will blame my rice bowl, that is, implement a strict accountability system. It cannot be said that the loan officer has only dealt with the transfer of the post and has not been held accountable for the huge losses caused by the bank. There is no high cost of violation of laws and regulations, and it is difficult to implement strict laws and regulations.
I think that only by ensuring that there are laws that must be enforced, violations of laws, prohibitions, and strict management can we ensure our execution and ensure the risk management capabilities of our banking industry. The bank itself is an industry that manages risks. Therefore, its own risk management must be more stringent, and implementation is not in place, and risk management cannot be discussed.
Our reporter: You just mentioned that the credit risk of steel trade originated from the extensive development model of China's banking industry during the transition period. At present, China has entered a crucial period of comprehensive deepening reform. In the face of a series of new problems and tests, such as the economic slowdown, the full liberalization of interest rate marketization, the deepening of financial disintermediation, and the technological change leading to industry changes, the traditional development methods and business models are no longer fully adapted to the new era. The situation requires that the transformation of the Chinese banking industry is imminent. Can you talk about your opinion about this?
Liao Wei: At present, China is in the midst of economic transformation, and emerging industries are booming. In the long run, the risk management and lending practices of these industries require commercial banks to participate. The development of these industries is inseparable from the support of the banking industry.
Therefore, first of all, I believe that in the process of economic transformation, an important focus of commercial banks is to study and explore how to rationally and scientifically provide credit support to emerging enterprises and provide integrated financial services. Because it is different from the traditional industry, most of the emerging enterprises are light assets. It is a big challenge for banks to judge based on risk judgment and scientifically and reasonably evaluate their assets.
I want to strengthen my understanding of emerging industries. I have a deeper understanding of this. We are relatively familiar with traditional industries such as manufacturing, but little is known about emerging industries such as high-tech industries, modern services, and network economies. Therefore, there is a lack of effective risk management methods and methods for these industries.
Secondly, since emerging companies adopt new management methods such as limited partner system, they should formulate an effective system to reasonably evaluate the risks of limited partners' investment activities, reasonably arrange the risk sharing of creditor's rights and equity, and provide them with them. Credit and commercial loans are also issues that commercial banks must address.
When entrepreneurs start a business, they are generally economic innovation and technological innovation, but the result is often the advancement of science and technology and the lag of economic innovation. Therefore, I suggest that while companies use experts to promote technological innovation, they must also rely on professional economic sectors to carry out economic innovations, and adopt a two-pronged approach to ensure economic viability and technical feasibility. Commercial banks can do some forward-looking work for them, such as the staff of their economic activities plan at the beginning of the business, the estimation of the potential risks of the company, and the consultation and assistance in the development process. I think this is also a new economic role and business point for the banking industry in the transformation process.
Third, in the process of transformation, the bank must have a clear and accurate estimate of the cash flow of the loan enterprise in the next five to ten years for the loan method with the expected return as the pledge. Commercial banks can sign long-term cooperation agreements with enterprises, provide services to enterprises, and obtain profits from the listing of enterprises. Although commercial banks are not allowed to hold equity, they can use the stocks as collateral to provide loans to enterprises after they are listed. This is a way for commercial banks to make loans based on the expected return of the company. In this way, the bank has effectively participated in the economic activities of the company, and has also enhanced the bank's ability to scientifically price the risks. It is also a vivid reflection of the transformation of the bank's business philosophy.
Shanghai Steel Trade Credit Risk Disposal Experience Can Be Learned
Our reporter: We understand that in the steel trade credit risk incident, the Shanghai Banking Regulatory Bureau firmly grasps the market-based risk mitigation principle and brings together the strengths of banks, regulators, peers and governments to adopt practical and feasible regulatory measures. After the aftermath of the work of treating both the symptoms and the root causes, the resolution of the steel trade risk of the Shanghai banking industry was carried out in an orderly manner, and relatively obvious phased results were achieved. Please share with us the specific experience and experience.
Liao Wei: In the process of handling the steel trade credit risk incident, my great experience is that dealing with complex risks should be clear in principle, powerful, feasible, and multi-pronged.
Due to the large number of banks involved in the credit risk incident, the large number of steel trade enterprises, the number of employees, the many interests and the complicated situation, the Shanghai Banking Regulatory Bureau should consider the bank’s creditor’s rights maintenance during the risk disposal process. We must also consider the long-term development of the steel trade industry and maintain the overall situation of social stability. Therefore, this risk disposal is a severe test for the comprehensive supervision capability of the Shanghai Banking Regulatory Bureau. Under the strong leadership and concern of the China Banking Regulatory Commission, with the support and assistance of the Shanghai Municipal Party Committee, the Municipal Government, the public security, the courts and other departments, the Shanghai Banking Regulatory Bureau has achieved phased results in risk management, which is also attributed to the Shanghai Banking Regulatory Bureau. Comrades are brave enough to take responsibility in the risk management process.
Before the credit risk of Shanghai Steel Trade was not fully exposed, the Bureau promptly carried out forward-looking risk warnings; after the risk exposure, we firmly grasped the principle of marketization and strictly followed the risks of “controlling, treating differently, and releasing risksâ€. The risk-resolving policy of “holding the bottom line†and putting forward practical and feasible regulatory measures; in the process of disposal, the process of risk mitigation is not impatient, the risk monitoring is not sloppy, the risk focus is not evaded, the temporary gains and losses are not taken care of, and the work is patient and meticulous. And conscientiously, the disposal measures are both principled and flexible. The convergence of these factors has enabled the Shanghai Banking Regulatory Bureau to obtain preliminary results in the resolution of steel trade risks.
Our reporter: The Shanghai Banking Regulatory Bureau took the lead in the nationwide warning of the credit risk of the steel trade industry, thus unveiling the prelude to the national steel trade credit risk disposal. It is conceivable that the choice of making a risk warning at that time must be well thought out. Can you talk about your feelings and experiences from the perspective of the regulator?
Liao Wei: For the supervision department, my experience is to strengthen the forward-looking and predicting ability of the industry risk. Because when the transaction is completed, the risk is dealt with, and the serious consequences are irreparable. Therefore, it is the core task of our regulatory authorities to take precautions and prevent risks before the incident occurs. In order to do this, the regulatory authorities must strengthen their own construction from two aspects.
First of all, the regulatory authorities must see their own shortcomings, and strive to reduce the "missing risk" or "mistaken risk" that is common in the world, and find a risk to adapt to market development and economic law in the process of solving difficulties. The road to control.
Secondly, the risk of individual can be handed over to other market entities, but timely judgment and warning of regional and systemic risks are the core tasks of the regulatory authorities and must be managed. Because the market individual is easily confined to specific collateral and other indicators, it is difficult to find systemic risks; and as a financial regulator, the market must be carried out from a systemic perspective rather than a bank or steel trader. Grasping and supervision.
For example, in 2011, after long-term follow-up and investigation of the financing phenomenon of steel trade enterprises, we found that there is a phenomenon of repeated pledge of movable property in the steel trade credit, and there is a serious over-financing behavior in the steel trade industry. In this regard, the Shanghai Banking Regulatory Bureau A risk warning decision was made. As a financial regulator, we must play an important role in macroeconomic judgment, forward-looking research and risk warning in the market economy.
Of course, making an estimate before the risk occurs is a challenge for regulators, but without such forward-looking projections, it is impossible to manage this risk effectively. Therefore, we must be brave in making progress and facing difficulties. Only in this way can we truly minimize the losses caused by risks to the industry.
Our reporter: In the case that the market is generally optimistic about the steel trade industry, the regulatory authorities have made a risk warning for it, which is easy for the steel traders to misunderstand the “singing bad†steel trade industry. In the face of the market's incomprehension, as a financial regulator, how do you properly handle and ensure the smooth handling of the disposal?
Liao Wei: If we neglect the existence of systemic risks, let the market develop blindly and spontaneously, and it is against the responsibility of a financial supervisor, the “night watchmanâ€; but when the market is generally optimistic, stand up to issue warnings and point out risks, then the market I may not understand or even fight against it for a while. In order to properly resolve the negative sentiment of the market and avoid adverse events that endanger social harmony and public property safety, adequate communication in the early stage is necessary.
At this time, communication has become an important means for the regulatory authorities to pass on the regulatory ideas and practices, to do a positive publicity, to resolve negative market sentiment, and to prevent the outbreak of the crisis.
The bank is between the regulatory level and the enterprise. If the financial regulator does not communicate with the company at all, the idea of ​​the regulator is difficult to convey to the enterprise. Therefore, in order to gain market recognition, it is necessary not only to face the banks, but also to lay down the shelves. Through various levels of communication with the parties, including enterprises, the company understands the original intention of our regulatory authorities and understands the systemic and regional risks. The hidden dangers and threats have won as much as possible the understanding and support of the participants in the market for the supervision work.
At the beginning of the risk management, I received a lot of calls from steel trade companies, and I have contacted steel trade companies at different levels. In Shanghai, there are enterprises that do steel trade in the form of zero-inventory. The technology is very advanced, and there are also steel traders who enter the industry late, rely solely on the volume, and have relatively extensive technology. Some steel traders have misunderstandings on regulatory policies. Regulators need to patiently explain the regulatory thinking of “guarantee and controlâ€, and do not engage in “one size fits allâ€. For credit companies that earnestly do steel trade, they will continue to provide credit support.
At the same time, we also pay attention to communication with the head office of the bank. Within one year, the Shanghai Banking Regulatory Bureau received the heads of the heads of the banks in charge of more than 30 times. It is hoped that the bank will correctly understand the overall situation of the credit risk of Shanghai Steel Trade. For steel trade risks, only through multiple ways and multiple ways, with time Change space, gradually resolve risks within 2-3 years, and stick to the bottom line of systemic and regional risks.
Of course, we are proposing more that the head office of the banks can do more policy support and encouragement for the development of the Shanghai branch, thus promoting the development of Shanghai's economy. As a national economic center, its branches have different roles from branches in other regions because of its market influence. In the process of transformation and innovation of the entire banking system, the role of Shanghai Branch is very important. Therefore, what Shanghai needs is the pressure of innovation rather than the pressure to make big assets. I think this is something that major banks need to consider.
Finally, our efforts have been positively responded by the head offices of various banks. The head offices of various banks have supported the dispositions in Shanghai Branch by increasing authorization, adding professional teams, writing off and packing and transferring, and achieved remarkable results.
Our reporter: What kind of aftermath work has the Shanghai Banking Regulatory Bureau made in response to the losses caused by the steel trade risk control incident?
Liao Wei: Since 2012, in order to solve the losses caused by the steel trade incident, we have also made some aftermath efforts. Especially in the later stage of steel trade credit risk work, we will focus more on the reflection and improvement of Shanghai banking industry, systematically analyze the causes of credit risk in steel trade industry, reflect on and learn lessons, and guide the banking industry further. Do a good job in credit management.
The first is to find out the facts. The bank is required to conduct a designated internal audit on the formation of the credit risk of steel trade, to ascertain the problems existing in the bank's credit culture, system implementation, and credit management. The bureau also conducts special inspections on steel trade, and comprehensively inspects the bank's credit in steel trade. Various problems exist in it.
The second is strict accountability. The bank is required to first be accountable for the problems existing in the credit negotiation of steel trade. For those involved in the credit authorization of steel trade, they must not escape the responsibility in the name of resignation before the accountability is completed. The bureau will refer to the bank’s steel trade according to the results of the special inspection. Persons who pay credit risk are strictly punished.
The third is to improve the external environment of credit management. In the course of the investigation, the SIPO found that the lack of a unified platform for the registration of bulk pledges of bulk commodities and the disorderly management of warehousing enterprises are important drivers for the deterioration of the credit risk of steel trade. For this reason, the SIPO has specially met with the Shanghai Financial Office and the Commercial Committee. The Ministry of Industry and Commerce and other departments have established special groups to promote the construction of the registration system for steel movable property pledges. At present, great progress has been made and this platform will be extended to the commodity sector in the future. At the same time, the city's industry and commerce, business committees and other departments will be promoted to strengthen the supervision and management of warehousing enterprise access and daily operations, and create a better external environment for bank credit risk management and control.
The fourth is to timely summarize the lessons learned by banks in the credit risk of steel trade. At present, the Bureau has conducted a detailed analysis of the causes and problems of the credit risk of Shanghai Banking Steel Trade, and put forward more feasible regulatory recommendations. The bureau also summed up the enlightenment of the credit risk of steel trade to the financial services of small and micro enterprises, so that the bank can eat a glimpse of the future.
In 2014, in accordance with the existing work plan, under the unified leadership of the China Banking Regulatory Commission and under the care and support of the Shanghai Municipal Party Committee and the Municipal Government, the Office will continue to actively and steadily urge the banking financial institutions within the jurisdiction to resolve the credit risk of steel trade. Work to create better conditions for the stability of the banking industry.
Build an external environment that is conducive to market development
Our reporter: Just now we mainly talked about the steel trade credit itself and the participants, but we also learned that the steel trade credit risk also exposed the blind expansion of industry capacity, lack of social credit, weak judicial power, etc. Question, can you talk about your external factors about the formation of the steel trade credit risk event?
Liao Wei: This steel trade credit risk incident, in addition to the problems of the banking industry and the steel trade industry itself, also exposed some local governments' misconduct in the investment attraction and the defects in the legal system. For example, some local governments' tax incentives in attracting investment have typical problems such as attracting investment and paying attention to management. It is precisely because China is in a period of transition that the development of any industry itself faces such an imperfect environment. Therefore, as the most important force in the allocation of social funds, commercial banks should be deeply aware of the shortcomings of the external environment in risk management, and strive to improve their internal control and risk management to maximize the resistance to the immature environment. Impact. For local governments, there is indeed room for further improvement in the construction and management of the market environment. For example, in improving the external environment of credit management, I think the government is still promising.
In short, we should take a multi-pronged approach from the administrative, judicial and supervisory aspects to effectively solve the problems and risks of the bank credit business.
Our reporter: To maintain the legitimate claims of banks, we must rely closely on the judicial power. Can you share with us the experience and feelings of the legal system during the disposal process?
Liao Wei: Specifically, we must first strengthen the construction of laws and regulations. To do this, we must achieve three "strong", that is, a strong guarantee for the rights of creditors, a strong punishment for illegal corporate violations, and a strong guarantee for judicial resources. Compared with Singapore, Hong Kong and other countries and regions, our laws and regulations protect creditors relatively weakly. In the setting of the law, many interests of the bank as creditors are not protected; in the face of unscrupulous enterprises that transfer assets in advance, we are now lacking the corresponding laws to punish them, or it is difficult to ensure the effectiveness of the law. This is also ours. In addition, in the face of a large number of private enterprise groups, our grassroots judicial resources are stretched, and the judicial personnel are too busy to meet the needs of bank litigation. Therefore, there is still a long way to go in the construction of the judicial environment.
Our reporter: During the entire steel trade incident, you have repeatedly mentioned the issue of industry associations and industry self-discipline. Both the Shanghai Banking Association and the Shanghai Steel Trade Association play an important role. In your opinion, what is the importance of industry associations in risk management?
Liao Wei: One of the important characteristics of marketization is that the government gradually transfers power to social forces. They form industry associations and conduct self-management and restraint. The industry associations play the role of “leaders†and “decision makersâ€. Role, while the government plays the role of “regulatorâ€. The main task is to maintain the normal operation of the industry association by adjusting the relationship between new and old members. After all, compared with administrative orders, the pressure of peers can promote the development of the marketization process of enterprises.
Therefore, we say that the self-discipline role of industry associations is very important in the process of government decentralization. There are many successful experiences in the world that can be used for reference. For example, industry associations establish the self-discipline requirements of enterprises and conduct mediation management. Only when the government gives maximum authority to the market and exerts its autonomy can the steady development of the marketization process be promoted.
This steel trade event, I am very grateful to the Steel Trade Chamber of Commerce in its role. Because at the time the group had no heads, the Chamber of Commerce took the lead in organizing the steel traders to communicate with us in a timely manner, avoiding further deterioration and loss of control; in addition, in the most difficult time of our work, the Chamber of Commerce took the lead in engaging in honest enterprises. During the commendation ceremony, I just communicated with various companies during the time. The combination of the two released a signal to the market that the regulatory authorities would fully support the integrity of the business and actively cooperate with the bank's steel trade enterprises. It is the best embodiment of the Chamber of Commerce to support our work in building an industry integrity system.
Our reporter: In the credit risk of steel trade, correctly handling the relationship between the market, the association and the bank has played a very important role in smoothing the risk. What do you think for this?
Liao Wei: Steel trading is a major category of bulk commodity trade. Establishing and perfecting the trading order of this market and strengthening the supervision of this market, the relevant government departments are duty-bound. After the steel trade risk occurred, the Shanghai Municipal Government instructed the relevant authorities to rectify the steel market order, regulate trading behavior, and strengthen supervision of this market; Shanghai Steel Dealers Association and Shanghai Bank Trade Association, Shanghai Steel Trade Credit Risk In the process of dissolving, the inter-industry coordination played an active role; all the lending banks acted in concert on the platform of the trade association, and there was pressure to maintain the pressure and steadily and orderly. Shanghai Steel Trade Risk Resolution can achieve phased results, which is an effective attempt by the market, associations and banks to play a role together.
Edited
At present, the reform and innovation of the FTA and the financial opening up are progressing steadily and orderly. On the hot and vibrant land of Shanghai, Liao Wei and all the colleagues of the Shanghai Banking Regulatory Bureau will remain firmly committed to the market-oriented regulatory concept, calmly facing the possible constraints of the internal and external environment of the development of the banking industry, and will be calm and calm. Supervision, forward-looking guidance, flexibility, and witness the healthy development, prosperity and stability of the Shanghai banking industry. This article was originally published in the 5th issue of China Banking Magazine in 2014.
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