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Chapter 25 Without "Trust" No Establishment: From Qianzhuang Bank to Commercial Bank (5)
According to an article by the Banking Supervision Department of the People's Bank of China, it was not until 2001 that China's four state-owned banks achieved a net decline in non-performing loan ratios for the first time.In the seven years before this, from 7 to 1994, the non-performing loans of my country's four major state-owned banks increased by an average of 2000 percentage points per year. In 3.2, the proportion of non-performing loans of the four major banks was 1995%. 21.4%. At the end of 2000, through hard work, the balance of non-performing loans dropped by 29.2 percentage points by 2001 billion yuan, and the non-performing loan ratio of the four major state-owned banks fell to 3.8%.In contrast, the non-performing loan ratio of Citibank of the United States is only 907%, that of HSBC is 25.4%, and that of Tokyo Mitsubishi is 1.9%.

In the three years from 1999 to 2000, although more than 1 trillion yuan of non-performing loans were divested, the non-performing loans of the four major banks did not decrease as expected, but increased as they were divested. In 1998, non-performing loans actually increased by more than 4900 billion yuan, in 1999 by 5800 billion yuan, and in 2000 by 3700 billion yuan.In the past three years, non-performing loans have increased by 1.44 trillion yuan, far higher than the 1 trillion yuan divested.

Many economists do not shy away from pointing out that China's banking industry is being dragged down by non-performing loans.What do bad loans mean?In short, it refers to the loans that have defaulted, and also refers to the proportion of non-performing loans of financial institutions in the total loan balance.Generally speaking, a loan is considered non-performing if the borrower delays repaying the principal and interest for more than three months.When the bank determines that the non-performing loan is irrecoverable, it should write it off from the profit.When the overdue loan is unrecoverable but has not yet been determined, provision for bad debt losses should be made on the books.When evaluating the quality of bank loans, loans are divided into five categories based on risk: normal, special mention, substandard, doubtful and loss, and the latter three categories are collectively called non-performing loans.We can also identify which assets are non-performing loans based on a calculation formula.

Non-performing loan ratio = (substandard loans + doubtful loans + loss loans) / various loans × 100%
Non-performing loans will bring great harm to society.Now, more and more people have also seen the danger of non-performing assets.The high non-performing loan ratio will affect the bank's ability to support the economy.Chinese banks have been extremely cautious about lending in recent years because too many non-performing loans have affected their ability to lend.In addition, if the non-performing loan problem is solved by issuing base currency, it will easily cause inflation.If we take it lightly, the occurrence of a large number of non-performing loans may even induce social moral hazard. If we intensify our efforts to deal with non-performing loans, it may lead to chain bankruptcy of enterprises, increasing financial risks and social crises.Moreover, the non-performing loan ratio of financial institutions is one of the important indicators for evaluating the safety of credit assets of financial institutions.A high non-performing loan ratio indicates that financial institutions have a high risk of recovering loans; a low non-performing loan ratio indicates that financial institutions have a low risk of recovering loans.

It can be seen from this that non-performing loans are indeed a headache, and after suffering from it, we must go all out to treat it.So how can it be cured?
There are several ways to treat the non-performing loan disease. The first is to strengthen the business supervision of financial companies to ensure the quality of each loan in the future and prevent new non-performing loans from arising.The second is to intensify the system reform of Chinese enterprises, and strengthen the management and competition mechanism of enterprises. The third is to adopt an appropriate expansionary monetary policy and give blood transfusions to some enterprises that can be revived to bring them back to life. The last measure is to issue base currency. Dilute non-performing loans.The third and fourth methods are to increase the money supply and offset non-performing loans through moderate inflation, thereby invigorating the Chinese economy and increasing the vitality of the economy.

Financial M&A: Returning to the Financial Supermarket

With the development of global financial integration, the financial industry worldwide has already begun to integrate.Many financial institutions have launched mergers and acquisitions, hoping to integrate resources to obtain more profits, and at the same time play a role in promoting the development of the financial industry.

In 1999, global mergers and acquisitions hit a historical record of US$33170 billion, and 21 M&A transactions involved more than US$100 billion.Mainly U.S.-funded banks, Goldman Sachs, Morgan Stanley, and Merrill Lynch rank among the top three, involving US$12780 billion, US$11310 billion, and US$10260 billion, respectively.

In order to adapt to this frenzy of mergers and acquisitions, on November 11 of the same year, the United States officially promulgated to "establish a financial system that allows banks, securities, insurance companies, and other financial service providers to associate with each other and manage prudently, thereby strengthening financial services. The "Financial Services Modernization Act" for the purpose of legislation, abolished the provisions of the "Glass-Steagall Act" that prohibits mixed operations, and "integrated" on the road of abandoning separation and moving to mixed operations The financial legal system of the United States has become a milestone legal document in the financial development of the United States, further promoting the process of financial mergers and acquisitions in the United States and even the world.

In the 21st century, there are still an endless stream of super-large financial mergers and acquisitions in the financial field that cross industries and regions.Although the pace of mergers and acquisitions has slowed down compared to 1999, it continues to stage scenes of reorganization dramas.In the United States, two long-established and prestigious financial companies, Chase Bank Group and J.P. Morgan, formally reached an agreement on September 2000, 9, to form a new alliance based on the acquisition of J.P. Morgan by Chase Bank Group. way to reorganize.After the merger, the new company will be named J.P. Morgan Chase Bank, with a total asset value of approximately US$13 billion.In Japan, after experiencing a series of major events such as the collapse of financial institutions such as Hokkaido Takushoku Bank and Yamaichi Securities, and the bankruptcy of Long-term Credit Bank and Japan Bond Bank, etc., the financial industry has once again set off a wave of mergers and reorganizations. The merger of Daiichi Quanye, Fuji and Industrial Bank is eye-catching. On September 6600, 2000, the establishment of "Mizuho Holdings", a merger of the three banks, was officially announced.This financial group has total assets of more than 9 trillion yen, and has rewritten the ranking of the world's top ten banks, becoming the world's largest financial group.Financial mergers and acquisitions have greatly intensified the alliance of the financial industry, forming a number of huge financial groups.

In the 20s, many companies in the world dreamed of establishing a "financial supermarket" that could provide one-stop financial services.However, among several companies that practiced the concept of "financial supermarket", they all ended in failure.In the 80st century, with the strengthening and deepening of financial globalization, this dream seems not far away.The financial circle tries to regain the dream of "financial supermarket" through mergers and acquisitions.

A financial supermarket is a bank that integrates its products and services and provides customers with a variety of financial products and value-added services through business cooperation with institutions in the same industry such as insurance companies, securities companies, real estate companies, etc. Integrated mode of operation.

When foreign consumers enter the multi-functional "financial supermarket", it is like entering a super shopping mall.Various financial needs can be met, from credit cards, foreign exchange, cars, housing loans to insurance, bonds and even tax payments.In Japan, many banks provide consumers with one-stop financial services that integrate banking, life insurance, and other agency services.In the United States, ordinary people can buy open-end securities investment funds as long as they go to a commercial bank. The stock market and foreign exchange market prices can also be seen in the bank. If they want to trade, all settlements can be completed here at one time.Not only does it affect the traditional consumption behavior of individuals to a certain extent, but it also becomes a symbol of a bank's image.Its economic and social benefits are very good.According to statistics, in the United States, consumer credit accounts for 20% of total bank loans.In Canada, 1/3 of ordinary bank loans are provided to individuals, and the world-renowned Citibank, Hong Kong's HSBC, and its financial supermarkets have become the main business of the bank's income.

In the process of developing financial supermarkets, financial mergers and acquisitions are playing a huge role in integration.Due to the closed ownership structure of banks and the impact of local protectionism, mergers and reorganizations among banks are rare. In March 1999, China Everbright Bank took over the creditor's rights, debts and intra-city business outlets of the former China Investment Bank as a whole, and took the first step in the asset restructuring of my country's banking industry in accordance with market principles.As the economies of scale brought about by Everbright Bank’s acquisition of the original investment bank gradually emerge, more commercial banks will embark on the road of mergers and acquisitions, resulting in a group of large banks with sufficient capital, strong assets, and a wide range of businesses. my country is also quietly rising.

Divided for a long time: the distance between the banking industry and other financial service industries

After the worldwide catastrophe of 1929-1932, Congress responded in 1933 to this famous financial disaster.The U.S. Congress passed the Glass-Steagall Act, the U.S. Banking Act of 1933.One of the important contents of the law is to establish the separation system of commercial banks and investment banks.This content was promoted by Congressmen Glass and Steagall, so it is commonly known as the "Glass-Steagall Act".

According to Glass-Steagall proponents, it was the mixing of commercial and investment banking that caused the banking panic of the late 20s and exacerbated the economic crisis.Based on their own observation and analysis of the great crisis, they concluded that the merger system of commercial banks and investment banks would damage the safety, stability and reputation of commercial banks, and also cause economic losses to depositors; It helps to protect the safety of banks and the interests of depositors; and, in view of the important status of banks, the realization of this goal also ensures the safety of the entire national economy.Proponents of the split system argue that there are several drawbacks (or risks) to the merger of the banking and securities industries; these drawbacks make the split system necessary.

However, is the split system really that reasonable?Since the birth of the Glass-Steagall method, there has been fierce debate surrounding it.With the practice of history, people have come to the opposite conclusion.Some risks are not appropriate, because they are not risks when viewed from another angle; some risks do exist, but they are not unique to the securities industry-and thus not the merger system-and cannot be prevented by the split system; the split system is more expensive than it can be play a positive role.Two other important reasons are: with the development of the financial industry, people have rediscovered the superiority of the merger system as a natural result of market operations, and found that the risks of the merger system can be overcome through low-cost risk prevention mechanisms; The emergence and rapid development of new financial instruments have had a huge impact on the banking industry, and have blurred the boundaries between the traditional banking industry and the securities industry. The clear division of the banking industry and the securities industry is the prerequisite for the existence of a separate system.

After the opinions of the opponents were continuously confirmed, in the 20s, there was a request to abolish the "Glass-Steagall Act" almost every time in the U.S. Congress. Securities companies and insurance companies acquire commercial banks, allowing commercial banks and other financial institutions to enter each other's territories.Since then, it has promoted bank mergers and acquisitions and accelerated mergers and acquisitions in the entire financial services industry.

Judging from the general trend of the development of the financial industry, the banking industry and other financial industries are bound to separate and combine for a long time.Integration is inevitable for market development.Thus, while the United States separated banking from other financial services after the Great Depression, not many countries followed suit.In fact, this separation was precisely the main difference in banking supervision between the United States and other countries in the past.Worldwide, countries have different ways of dealing with the relationship between the banking industry and the securities industry and other financial services industries.However, from the perspective of economies with relatively developed financial industries, there are three basic modes of management in the banking and securities industries.

The first is the universal banking model in Germany, Finland and Switzerland.There is no separation between banking and securities.Under the universal banking system, universal banks provide all banking, securities, real estate and insurance services.

The second model is the England-style universal banking system, which exists in the United Kingdom and countries with close ties to the United Kingdom, such as Canada and Australia, as well as the United States.English-style universal banks are able to engage in securities underwriting business, but differ from German-style universal banks in the following three aspects: different businesses are carried out by different subsidiaries recognized by law; banks usually do not hold shares in commercial companies; banks and insurance companies connections are not very common.

The third model is that in countries such as Japan, there is a separation between banks and other financial services.The biggest difference between the U.S. and Japanese banking systems is that Japanese banks can hold a large number of stocks in commercial companies, while U.S. banks cannot.Although Japan's "Securities Law" separates banking business and securities business in Chapter 65, commercial banks are increasingly allowed to engage in securities business. Like the United States, Japan's banking system is increasingly approaching that of England universal bank.

There is a saying in the book of war that the world must be divided for a long time, and it must be divided for a long time.This sentence can also be used in economic activities.The distance between the banking industry and other financial service industries fluctuates depending on the state of economic development. There should be a corresponding reasonable distance in a specific period of time, and there is no conclusion that whether they are divided or combined.

(End of this chapter)