M&As, not bankruptcy, main option for banks, regulator says

Banking institutions can experiment with bankruptcy as an option for market exit, although mergers and acquisitions will remain as the main option, said Xiao Yuanqi, chief risk officer and spokesman of the China Banking and Insurance Regulatory Commission (CBIRC), at a media briefing on Thursday.

Speaking of the lower-than-expected operational performance of certain small and medium-sized financial institutions, he noted that although each institution has its own features, it has to abide by the law of market.

“The banking and insurance regulator will try to avoid the exposure of high risk at newly established financial institutions based on a study of past experience and will lower the risk through multiple measures, including mergers and acquisitions,” he said.

In terms of private enterprise loans, Yang Liping, chief inspection officer of the CBIRC, warned banks against “granting credit to private enterprises in a campaign style”.

Yang said the regulator will step up efforts to monitor the use of private enterprise loans by verifying the authentication of data associated with such loans and checking whether or not the low-cost funding that companies have obtained with the benefit of favorable policies are used in conformity with regulations.

The regulator will also accelerate the launching of administrative measures for net capital of banks’ wealth management subsidiaries, pay close attention to the use of capital, and continue to make steady progress with the establishment of banks’ wealth management subsidiaries, said Li Wenhong, head of the innovative business supervision department of the CBIRC.