A number of small and medium-sized banks will make big moves! It mainly involves the disclosure → of village and township banks, the State Administration of Financial Supervision and other disclosures

China Business Daily (Reporter Wang Tongxu) With the advancement of the reform of small and medium-sized financial institutions, the pace of structural restructuring of small and medium-sized banks has accelerated. Recently, a number of small and medium-sized banks have been approved for merger and reorganization.

Luo Zhiheng, chief economist of Guangdong Kai Securities, said that the restructuring is conducive to gathering the high-quality resources of many small and medium-sized banks. At the same time, the merger and reorganization is also a redesign of the equity structure and governance structure.

Industry insiders believe that in the coming period, the restructuring of small and medium-sized banks may be further accelerated, but after the reorganization, they will also face many problems such as how to optimize personnel and how to dispose of non-performing assets.

A number of small and medium-sized banks have merged and reorganized

On April 2 this year, the Guangdong Supervision Bureau of the State Administration of Financial Supervision disclosed the "Reply on the Acquisition of Zhongshan Guzhen Nanyue Village Bank Co., Ltd. by Guangdong Nanyue Bank Co., Ltd. to Establish a Branch". According to the reply, it was agreed that Guangdong Nanyue Bank would acquire Nanyue Village Bank in Zhongshan Guzhen and establish Zhongshan Branch of Guangdong Nanyue Bank Co., Ltd.

On April 9, the official website of the State Administration of Financial Supervision and Administration announced that it agreed that Xinjiang Bank Co., Ltd. would absorb and merge Korla Bank Co., Ltd., and undertake the assets, liabilities, business, institutions and employees of Korla Bank Co., Ltd. after liquidation and capital verification.

On April 12, the Liangjiang Supervision Branch of the State Administration of Financial Supervision and Administration approved that it agreed that Hengfeng Bank Co., Ltd. would acquire Chongqing Jiangbei Hengfeng Village Bank Co., Ltd., undertake all its assets, liabilities, rights and obligations, and establish Chongqing Dashiba Branch of Hengfeng Bank Co., Ltd.

Specifically, Hengfeng Bank's acquisition of Chongqing Jiangbei Hengfeng Village Bank adopted the method of "village to expenditure", while Guangdong Nanyue Bank's acquisition of Zhongshan Guzhen Nanyue Village Bank adopted the method of "village to subdivision".

A reporter from China Business Daily learned that there have been many cases in which village and township banks have achieved structural restructuring through "village reform". For example, in November 2023, Huaxia Bank was approved to acquire Beijing Daxing Huaxia Village Bank and set up Huaxia Bank Beijing Kangzhuang Road Branch and Beijing Pangezhuang Branch.

People in the industry generally believe that the current village and township banks are developing in the direction of reduction. Compared to sub-branches, branches have a wider range of services and can provide more services. "Village to subdivision" is more conducive to the new institutions to become bigger and stronger, and better serve customers in townships and rural areas.

Merger and reorganization become a "big play"

Mergers and restructurings of small and medium-sized banks are not uncommon.

Back at the end of 2020, the Notice on Further Promoting the Reform and Restructuring of Rural Banks to Resolve Risks issued by the General Office of the former China Banking and Insurance Regulatory Commission proposed to promote the merger and reorganization of rural banks in an appropriate and orderly manner. Village or township banks with good regulatory ratings, outstanding operation and management capabilities, and distinctive characteristics of supporting agriculture and small enterprises are allowed to absorb and merge high-risk village and township banks in the county (district) or neighboring counties (districts) in the province and convert them into sub-branches.

In recent years, especially since the inauguration of the State Administration of Financial Regulation, the pace of merger and reorganization of small and medium-sized banks has been accelerating.

"The restructuring of village and township banks has been launched in an all-round way." On January 29 this year, the State Administration of Financial Supervision and Administration stated in its 2023 work summary that since 2023, a number of village and township banks across the country have been absorbed and merged by the main initiating bank or other village and township banks.

Yuan Shuai, deputy secretary-general of the Zhongguancun Internet of Things Industry Alliance and executive director of the high-quality development promotion project of specialized, special and new enterprises, said in an interview with reporters that with the continuous development of the financial market and the intensification of competition, small and medium-sized banks are facing increasing operating pressure. Through absorption and merger, the optimal allocation of resources can be realized, and the operational efficiency and competitiveness of banks can be improved. At the same time, the combined bank can better meet the needs of customers and provide more comprehensive and high-quality financial services. In addition, the merger of small and medium-sized banks can help prevent and resolve financial risks. In financial markets, small and medium-sized banks tend to be more risky. Through mergers and acquisitions, risks can be diversified and reduced, and the bank's ability to resist risks can be improved. The combined bank can operate in a more disciplined manner, reducing the occurrence of irregularities and risk events.

"It cannot be ignored that there will also be some risks and challenges in the process of merger and absorption, such as cultural conflicts, employee placement and other issues." Bai Wenxi, a distinguished tutor of the Graduate School of the Chinese Academy of Social Sciences, told reporters.

Yuan Shuai said that in the process of merger, it is necessary to pay attention to internal integration and cultural construction, strengthen supervision and risk prevention, and ensure that the merged bank can operate steadily. At the same time, it is also necessary to pay attention to whether the merged bank can truly achieve optimal allocation of resources and improve efficiency, so as to avoid the situation of "big but not strong".

The reform of small and medium-sized banks has been accelerated

In addition to the frequent absorption and merger, the reform of provincial associations has also ushered in new progress.

At the beginning of this year, the information disclosed on the official website of the State Administration of Financial Supervision showed that it agreed to establish three provincial-level rural commercial banks, including: agreeing to establish a rural commercial joint bank on the basis of the Guangxi Zhuang Autonomous Region Rural Credit Cooperatives Association, and the name of the institution is Guangxi Rural Commercial United Bank Co., Ltd.; Agreed to establish Hainan Rural Commercial Bank Co., Ltd.; Agreed to establish Sichuan Rural Commercial United Bank Co., Ltd.

"The reform of small and medium-sized banks, including provincial associations, is the highlight of the financial reform in 2024, and it is also in line with the requirements of the Central Financial Work Conference on 'timely disposal of risks of small and medium-sized financial institutions'." Dong Ximiao, chief researcher of Zhaolian, said that there will be reform plans in other places that will be approved one after another, and it is expected that the provincial rural commercial bank will be the mainstay, and some areas will adopt the provincial rural commercial bank model.

According to the China Financial Stability Report (2023) released by the People's Bank of China in December last year, the reform of rural credit cooperatives has accelerated significantly since 2022. Zhejiang, Liaoning, Shanxi, Henan, Guangxi, Hainan and other provinces have approved the reform plan of rural credit cooperatives to reduce risk. Zhejiang Rural Commercial United Bank, Liaoning Rural Commercial Bank, and Henan Rural Commercial United Bank have been established, Shanxi Rural Commercial United Bank has been approved for establishment, and Guangxi and Hainan are also speeding up the establishment of provincial-level institutions. Other provinces are strengthening communication with relevant departments and stepping up efforts to improve the reform and risk reduction plan of rural credit cooperatives.

Looking ahead, industry insiders generally predict that the reform of small and medium-sized banks, including the reform of rural credit cooperatives, will be further accelerated.