At least 20 senior executives were sacked in half a year, and small and medium-sized banks have become the hardest hit areas for anti-corruption. The reasons are worth pondering!

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Small and medium-sized banks are becoming the hardest hit areas of financial anti-corruption.

Recently, the head of the banking and insurance regulatory department has frequently mentioned the reform and insurance of small and medium-sized banks and the corruption in this field.

From the perspective of specific cases, there are not only executives of small and medium-sized banks who have been frequently investigated and punished, who absconded after illegally issuing loans, but also regulators who have been sacked one after another, which is shocking.

By suntingyang

This article is reprinted from the wechat official account “chinaeconomicweekly” (id:chinaeconomicweekly). The original article was first published on June 14, 2022. The original title was “women presidents absconded by lending 30billion yuan, at least 20 senior executives were sacked in half a year ? small and medium-sized finance became a major anti-corruption disaster area”.

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Why small and medium-sized banks become the hardest hit area of anti-corruption


Recently, some depositors reported that four rural banks in Henan had difficulty in withdrawing money, which caused continuous concern. The relevant person in charge of the China Banking and Insurance Regulatory Commission responded at the news briefing on May 20 that the major shareholders of these rural banks were suspected of violating the law and committing crimes by using third-party platforms or funds brokers to absorb public funds.

At the news briefing, the person in charge of the China Banking and Insurance Regulatory Commission introduced that since 2018, the China Banking and Insurance Regulatory Commission has disposed of 627 high-risk rural small and medium-sized banks and disposed of 2.6 trillion yuan of non-performing loans, exceeding the sum of the previous 10 years. Meanwhile, 289 small and medium-sized rural banks received 133.4 billion yuan of capital injection. At this stage, the overall operation of rural banks is relatively stable, with a non-performing loan ratio of about 4% and a provision coverage rate of about 110%.

However, public information shows that the operation soundness of rural banks is obviously weaker than that of large commercial banks. By the end of 2021, the non-performing loan ratio of China’s large commercial banks was 1.47% and the provision coverage ratio was 220%.

On May 17, the Party committee of the China Banking and Insurance Regulatory Commission (CIRC) mentioned in its article “persistent prevention and resolution of major financial risks” that in recent years, small and medium-sized financial institutions have made positive progress in the reform of insurance, but there are also problems such as the actual risk is higher than the book level, the difficulty of stock risk disposal, and the relative concentration of regional risks.

The article also mentioned that important achievements have been made in preventing and resolving major financial risks, resolutely investigating and dealing with the corruption behind the risk chaos, and severely punishing all kinds of regulatory failures and illegal and criminal acts. A number of major and important cases with bad market impact were resolutely investigated and dealt with, and a number of corrupt elements who colluded with officials and businessmen, transferred interests and illegally occupied were brought to justice.

Four days later, on May 13, the China Banking and Insurance Regulatory Commission revealed that since 2021, 63 “top leaders” of small and medium-sized banks in Liaoning, the hardest hit financial risk area, have taken lien and criminal enforcement measures.

Since this year, the number of senior executives of small and medium-sized banks in Liaoning has also ranked first. According to incomplete statistics by the reporter, since the beginning of the year, Liaoning has 4 former senior executives of small and medium-sized banks suspected of violating discipline and laws and subject to disciplinary review and supervision, ranking in the forefront of all provinces (as shown in the table below).

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Two directors of the supervision department of rural small and medium-sized financial institutions were sacked one after another


On April 22, according to the information from the discipline inspection and supervision team of the Central Commission for Discipline Inspection and the State Supervision Commission in the China Banking and Insurance Regulatory Commission and the supervision commission of Heilongjiang Provincial Commission for Discipline Inspection, jiangliming, the former director of the supervision department of rural small and medium-sized financial institutions of the CBRC, was suspected of serious violations of discipline and law and was under joint review and investigation by the discipline inspection and supervision team of the Central Commission for Discipline Inspection and the State Supervision Commission in the China Banking and Insurance Regulatory Commission and the Jiamusi Municipal Supervision Commission.

According to Jiang Liming’s resume, she started working in the central bank in 1985 and served as the director of the supervision department of rural small and medium-sized financial institutions of the CBRC from March 2015 to November 2016.

Guohong, jiangliming’s successor, was sacked earlier than jiangliming.

Four months ago, that is, in December 2021, the Central Commission for Discipline Inspection and the state Regulatory Commission issued that Guohong, former director of the supervision department of rural small and medium-sized banking institutions of the China Banking and Insurance Regulatory Commission, was “double opened”.

Guohong was the director of the supervision department of rural small and medium-sized financial institutions of the CBRC from November 2016 to March 2018. After the institutional reform, from August 2018 to April 2021, he served as the director of the supervision department of rural small and medium-sized banks under the China Banking and Insurance Regulatory Commission.

According to the official release, the discipline inspection and supervision team of the Central Commission for Discipline Inspection and the state regulatory commission in the China Banking and Insurance Regulatory Commission and the Tianjin municipal regulatory commission conducted disciplinary review and supervision investigation on Guo Hong’s serious violations of discipline and law. Guohong’s mistakes include violating work discipline, divulging patrol work information, and using his position influence to say hello to private enterprise owners for loans. Guohong’s behavior seriously violated the party’s discipline, constituted a serious duty violation and was suspected of taking bribes. After the 18th and 19th National Congress of the Communist Party of China, he still did not stop. It was serious in nature and had a bad impact. Therefore, Guohong should be severely punished and given “double opportunities”. Relevant departments have transferred his suspected crime to the procuratorial organ for examination and prosecution according to law, and the property involved has been transferred with the case.

According to the official release, Guohong’s problems mainly occurred during his tenure as director of the supervision department of rural small and medium-sized financial institutions of the CBRC and director of the supervision department of rural small and medium-sized banking institutions of the CBRC. Why jiangliming was investigated is still unknown, but her resume may give us a glimpse.

After leaving the supervision department of rural small and medium-sized financial institutions of the CBRC, jiangliming took up her new job at China Evergrande (3333.hk). China Evergrande introduced in its 2017 annual report that jiangliming, as the vice president of the company, assisted in the fund management of the group system and had more than 32 years of experience in the management of financial regulators and banking systems. During jiangliming’s stay in Evergrande, Evergrande acquired the shares of Shengjing Bank (2066.hk) and became the largest shareholder.

In february2016, Evergrande disclosed that due to the strong financial performance of Shengjing bank, its subsidiaries acquired the shares of Shengjing bank in the Hong Kong market. By june2019, after Evergrande’s companies subscribed for the domestic shares of Shengjing bank, Evergrande held 36.4% of the shares of Shengjing bank, becoming the largest shareholder of Shengjing bank. However, after Evergrande acquired the shares of Shengjing bank, the financial performance of Shengjing bank deteriorated. From 2016 to 2020, the return on net assets of Shengjing bank was 15.57%, 15.55%, 9.49%, 8.06% and 1.52% respectively. At the same time, the non-performing loan ratio of Shengjing bank has soared, but the provision coverage of non-performing loans, which represents the ability to prevent risks, is declining.

The provision coverage ratio is a bank’s resistance to bad debt risk. The high provision coverage generally indicates that the bank has sufficient funds to resist risks; The decline in provision coverage often indicates that banks’ ability to resist risks is also declining.

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From June 2016 to December 2020, the non-performing loan ratio of Shengjing bank soared from 0.53% to 3.26%. In the same period, the non-performing loan ratio of national commercial banks only slightly increased from 1.49% to 1.81%. The increase in the non-performing loan ratio of Shengjing bank was much higher than the industry average.

In june2016, Shengjing bank’s non-performing loan ratio was not high, but it was rich. The non-performing loan provision coverage rate had reached 387.49%, 171 percentage points higher than that of national commercial banks.

In december2020, when the non-performing loan ratio of Shengjing bank was high, the provision coverage ratio was only 114.05%, down 273 percentage points, 75.72 percentage points lower than that of national commercial banks.

In the 2021 follow-up rating report of Shengjing bank in July, 2021, the rating agency united credit said, “Shengjing bank has a high degree of risk exposure to anonymous customers, and the proportion of non interbank group customers’ risk exposure in Tier 1 capital is also at a high level. It has broken through the regulatory restrictions, and it is necessary to continue to pay attention to its large-scale risk concentration exposure and related risks.”

On December 31, 2020, jiangliming resigned as vice president of Evergrande.

In the third quarter of 2021, Evergrande’s capital chain broke. On September 29 of that year, Evergrande disclosed that its subsidiaries sold shares of Shengjing bank to Shenyang Shengjing financial holding Investment Group Co., Ltd., a state-controlled enterprise. Shengjing bank requires that all proceeds from the sale shall be used to repay relevant debts of Evergrande to Shengjing bank.

On the same day, Shengjing bank announced that after the subsidiary of Shenyang SASAC increased its shareholding in the bank, the largest shareholder of the bank was a state-owned shareholder, which optimized the equity structure and enhanced the strength of shareholders.

Shengjing bank reported in 2021 that in the past year, it actively optimized the equity structure, and the municipal state-owned enterprises increased their holdings to become the largest shareholder, further enhancing their risk resistance. Actively resolve stock risks, continue to strengthen the collection and disposal of non-performing assets and the provision for impairment, and improve the level of provision and the ability to cover risks.

Is jiangliming’s sacking related to Shengjing bank? What role did it play in the Shengjing incident? These questions remain to be answered.

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The female president absconded after lending 30billion yuan and was arrested by “Hongtong”


Evergrande, the major shareholder, did not operate alone in the Shengjing bank incident.

At the press briefing on May 20, the head of the China Banking and Insurance Regulatory Commission said that in view of the frequent occurrence of shareholder equity chaos in small and medium-sized rural banks, the China Banking and Insurance Regulatory Commission launched a three-year special rectification of shareholder equity from 2018 to 2020 to standardize and improve the shareholder equity management and corporate governance of small and medium-sized rural banks. We intensified punishment on outstanding issues such as illegal shareholding, manipulation of the normal operation of institutions, and the use of related party transactions to transfer interests. We restricted the voting rights of more than 4000 shareholders and ordered them to transfer more than 6 billion shares.

On May 31, the China Banking and Insurance Regulatory Commission (CIRC) disclosed the fifth batch of major illegal shareholders, a total of 43, 19 of which involved three rural commercial banks and one rural bank in Liaoning. Six months ago, the China Banking and Insurance Regulatory Commission announced that among the fourth batch of major illegal shareholders, four shareholders were the top four shareholders of Liaoyang rural commercial bank, with a shareholding ratio of nearly 10%. The cbcirc said that the disclosure of shareholders’ violations of laws and regulations mainly includes 7 categories, including illegal related party transactions, concealment of related party relationships, and serious evasion of bank debts.

On October 4, 2021, the State Supervision Commission of the Central Commission for Discipline Inspection reported that jiangdongmei, the former president of Liaoyang rural commercial bank, had been arrested and repatriated. According to the circular, jiangdongmei was originally the Deputy Secretary of the Party committee and President of Liaoyang rural commercial bank. She was suspected of taking bribes and illegally granting loans, and fled in March 2021. In April of that year, the Liaoning Provincial supervisory organ filed a case against Jiang Dongmei for investigation, and in July, the International Criminal Police Organization issued a red notice for her arrest. Through international law enforcement cooperation, the Chinese side has requested the foreign law enforcement authorities to capture and repatriate him.

Jiangdongmei said in the 2018 annual report of Liaoyang rural commercial bank that in 2018, it focused on supporting the supply chain enterprises with Liaoning Zhongwang group as the core, and put in more than 30billion yuan of loans throughout the year, which gave full financial support to the transformation and upgrading of private enterprises and made due contributions to local economic development. The annual report also disclosed that on July 21 of that year, senior executives of the bank went to Zhongwang group to study and investigate. On November 30, they supported the development of private enterprises, and four joint party branches of the head office visited Zhongwang group.

The same annual report disclosed that the equity of two shareholders of the bank was held by Liaoning Zhongwang group, and two directors of the bank came from these two shareholders. In 2018, the bank’s loan balance was 35.4 billion yuan, an increase of 20.5 billion yuan or 138% over the beginning of the year.

Liaoning Zhongwang group is a subsidiary of China Zhongwang (01333.hk). On October 15, 2021, China Zhongwang announced that its subsidiaries Liaoyang Zhongwang refined aluminum industry Co., Ltd. and Liaoning Zhongwang Group Co., Ltd. had serious operating difficulties due to major losses and operational difficulties, and through the efforts of many parties, they could not rely on their own efforts to solve the current problems.

The trading of the company’s shares was suspended on August 30, 2021. As of June 8 this year, the stock has not resumed trading.

Previously, on March 24, 2021, Liaoyang rural commercial bank made 28 applications for pre litigation property preservation, of which 24 were related to Zhongwang group and related enterprises. The other four shareholders of the parties used tianyancha app to penetrate upward, and finally pointed to Liaoning Zhongwang.

In terms of time, Liaoyang rural commercial bank adopted property preservation before litigation, which was the same month as jiangdongmei’s flight.

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