Original title: Precise dismantling of shadow banking risks
Financial risk prevention and control is the highlight of the battle to prevent and address key risks and important gradual results have been achieved so far. Recently, the China Banking and Insurance Regulatory Commission revealed that financial risks have gradually moved from divergence to convergence, a number of important hidden dangers have been “precisely defused”, the scale of the high-risk shadow banking system has dropped by about 29 trillion yuan from its all-time high and the financial order has greatly improved.
Shadow banking mainly refers to the credit business of non-bank financial institutions, it is a system of credit intermediaries that is outside the banking regulatory system and can cause systemic risk and regulatory arbitrage, including various related commercial institutions and activities. In particular, it includes interbank investments in specific vehicles and interbank financial management, borrowed loans, fiduciary loans and P2P network loans.
Shadow banking is nested in layers, some funds are not invested transparently and it is difficult for regulators to effectively monitor the actual leverage ratio. When individual banks provide business finance, they use shadow banking to provide short-term funds to finance long-term projects, which increases liquidity risks. Furthermore, the shadow banking system is also closely linked to some illicit credits. Individual banks used the shadow banking “channel” to transform “on balance” credit funds into “off balance sheet” asset management funds, which were supposed to support the real economy, and imported funds for some firms in violation of regulations, accumulating financial risks.
Shadow banking activity often spans multiple markets and multiple financial institutions, which greatly increases the contagion of financial risks across different markets and institutions. Once high-risk shadow banking is out of control, it can lead to systemic risk.
In recent years, regulators have seen dismantling shadow banking risks as an important task and have standardized the development of the wealth management industry as an important starting point for this work. After the continued adjustment, the risk of my country’s quasi-credit shadow banking system has been significantly reduced and equity assets have been significantly reduced. It has effectively curbed the decentralization of funds from real to virtual and has created a political space to stabilize the macroeconomic market and play the anti-cyclical role of finance.
Although the rectification work has had obvious results, shadow banking is still a potential risk point in current financial work and could rebound slightly if attention is not paid. It should be noted that some shadow banking products have complex structures and high levels of leverage and the hidden risks are still relatively large. Some institutions may generate new variants of the shadow banking system in the name of financial innovation, which deserves a high level of supervision.
There is a need to strengthen the risk monitoring of credit-like shadow banking and continue to reduce high-risk shadow banking. Multi-layered nesting, fund inactivity, real-to-fake deviation, and fake financial innovation are strictly prohibited. Financial institutions should conscientiously implement new wealth management regulations, complete rectification of existing wealth management activities such as bank wealth management, trust and other existing cases in time, and prevent disorderly increase in leverage through financial products again transversal. Regulators should continue to strengthen the monitoring and analysis of various types of shadow banking activities, develop relevant response plans and conduct timely supervision through the Financial Supervision Coordination Mechanism for some new products and cross-cutting and cross-cutting activities in order to prevent gap and arbitrage Behavior.
To prevent shadow banking risk rebound, it is necessary to maintain regulatory focus on banking and financial institutions, urge banks and other financial institutions to implement regulatory requirements, regulate and effectively rectify shadow banking and cross-border assets. – financial institutions, firmly promote the transformation of the wealth management business and strengthen cooperation between banks and other financial institutions to better serve the real economy. Banking and financial institutions must play a role in the service of the real economy and must not lose their financial origins for small profits.
[Direttore responsabile: Cao Jing]
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