The scope of AMC's non-performing financial asset acquisition institutions will be broadened.
On May 13, a reporter from Beijing Business Daily learned that a few days ago, the State Administration of Financial Supervision issued the "Notice on Implementing the Guiding Opinions and <> of the General Office of the China Banking and Insurance Regulatory Commission on Guiding Financial Asset Management Companies to Focus on Their Main Business and Actively Participate in the Reform of Small and Medium-sized Financial Institutions to Reduce Risks" (hereinafter referred to as the "Notice"), clarifying that large banks and joint-stock banks can also transfer five types of risk assets such as debt committee projects to financial asset management companies (AMCs).
In the opinion of analysts, this move is conducive to expanding the disposal channels of non-performing assets of large banks and joint-stock banks and improving the efficiency of disposal; At the same time, it will also help to improve AMC's management capabilities.
Expansion of five types of risk asset channels
On May 13, a reporter from Beijing Business Daily learned that a few days ago, the State Administration of Financial Supervision issued a "Notice" to large banks, joint-stock banks, and financial asset management companies (AMCs), broadening the scope of institutions for AMC to acquire non-performing financial assets.
The Circular points out that large banks, joint-stock banks and other banking institutions may apply the relevant policies related to "relevant financial institutions" in Articles (8), (9) and (10) of the Guiding Opinions on Guiding Financial Asset Management Companies to Focus on Their Main Business and Actively Participate in the Reform of Small and Medium-sized Financial Institutions (hereinafter referred to as the "Guiding Opinions") to transfer qualified risk assets to AMCs, and carry out structured transactions with AMCs on the basis of real valuations and on the premise of real transfer of assets. After the transfer of assets, accept the entrustment of AMC to continue to dispose of non-performing assets.
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It is understood that the "Guiding Opinions" was issued in May 2022 to further promote AMCs to play an active role in the reform of small and medium-sized financial institutions. Among them, Article (8) clarifies that the scope of acquisition of financial assets shall be appropriately broadened. Relevant financial institutions can transfer the following risk assets to AMCs: projects involving debt committees; The debtor has entered into bankruptcy proceedings; The principal or interest has been overdue for more than 90 days; The debtor has defaulted on the issuance of bonds in the open market; Due to the impact of the epidemic, overdue assets or related debt repayment assets appear again after the deferred repayment of principal and interest. The risk weights and operating procedures of AMC's bulk acquisition of the above-mentioned types of assets shall be handled with reference to the bulk acquisition of non-performing assets.
A bank analyst pointed out that the scope of AMC's acquisition of the above-mentioned non-performing financial assets has been expanded to large banks and joint-stock banks, mainly to expand the channels for the disposal of non-performing assets of large banks and joint-stock banks, improve the efficiency of non-performing asset disposal, and also help improve AMC's operating capabilities.
Clarify the principles for the disposal of non-performing asset transactions
In addition to broadening the sources of risk assets, the Circular also further clarifies the structured disposal of non-performing assets and the anti-entrustment of disposal.
The Circular requires that both parties to a structured transaction shall strictly comply with the relevant provisions of the accounting standards for the accounting treatment of the transferred assets, and shall not conceal the risk assets through the transaction structure design.
For the anti-entrustment disposal business, the Notice points out that when carrying out the anti-entrustment disposal business, the AMC shall fully demonstrate and evaluate the necessity of the anti-entrustment disposal, ensure that it complies with the principle of maximizing the income from the disposal of non-performing assets, retain the decision-making power of major asset disposal matters, carry out necessary control over the asset disposal process, timely and comprehensively grasp the asset disposal situation, and urge the entrusted party to perform its duties and responsibilities. AMC shall not require the trustee to promise to provide any form of fixed income, and banking institutions shall not substantially bear the credit risk of the transferred assets by promising fixed income or other means when entrusted for disposal.
In order to facilitate the transferor and transferee of non-performing assets to fully assess the value of the assets, the Circular requires that banking institutions should provide the necessary conditions and time for the due diligence and quotation decision of the AMC's acquisition, and in principle, should provide no less than 15 working days for due diligence time; If a banking institution makes a major temporary adjustment to the asset package to be transferred during the due diligence and internal decision-making period of the AMC, it shall fully disclose the information to the AMC in a timely manner and appropriately extend the due diligence period. AMCs should conduct due diligence independently and prudently, and should not lower their due diligence standards due to structured transaction arrangements.
Wang Yang, chief non-performing asset researcher of China Cinda Research Department, said in an interview with a reporter from Beijing Business Daily that the "Notice" makes it clear that large banks, joint-stock banks and other banking institutions can apply the relevant provisions of the "Guiding Opinions" to transfer five types of risk assets such as debt committee projects to AMC, and carry out structured transactions and anti-entrustment disposal under the premise of real transfer of assets, which will help promote large banks and joint-stock banks to clear risk assets and revitalize inefficient assets. At the same time, large exposures of small and medium-sized financial institutions may come from large enterprises, which tend to drag down multiple institutions. This policy will help AMCs play the role of aggregating risk assets and isolating risk contagion, coordinate bailout plans from the perspective of debtors, improve the efficiency of risk disposal of small and medium-sized banks, and reduce disposal costs.
Prudently resolve the risk of non-performing assets
Non-performing loans and other non-performing debt assets sold by banks are the main source of AMC's acquisition of financial non-performing assets. Judging from the situation of the two listed AMCs, in 2023, the non-performing assets of banks and financial institutions acquired by CITIC Financial Assets and China Cinda will account for more than 90% of the financial non-performing assets.
Among them, the amount of financial non-performing assets of large commercial banks and joint-stock banks acquired by CITIC Financial Assets was 7.605 billion yuan and 19.444 billion yuan respectively, an increase of 64.4% and 54.37% over the end of the previous year; The amount of financial non-performing assets of large commercial banks acquired by China Cinda was 10.357 billion yuan, an increase of 30.09% over the end of the previous year.
This is also evidenced by the Annual Report on the Pilot Business of Non-Performing Loan Transfer (2023) previously released by the Banking Credit Asset Registration and Circulation Center (hereinafter referred to as "Yindeng Center"). According to the report, in 2023, large state-controlled banks and national joint-stock banks will launch a large scale in the market for the transfer of non-performing loans to the public, with the first batch of pilot institutions transferring 48 large banks with a total of 10.784 billion yuan of outstanding principal and interest, and 52 transactions of national joint-stock banks transferring out of 52 transactions, with a total of 6.235 billion yuan of outstanding principal and interest.
The growth rate of non-performing assets of urban and rural commercial banks has also been relatively rapid. At the end of 2023, the amount of financial non-performing assets of urban and rural commercial banks acquired by China Cinda was 18.017 billion yuan, an increase of 70.07% from the end of the previous year, and the proportion of financial non-performing assets increased from 19% to 39%.
Looking forward to the acquisition and disposal of non-performing assets in 2024, the 2024 China Financial Non-Performing Assets Market Survey Report released by Orient Asset pointed out that respondents from commercial banks generally believe that the urgency of banks to dispose of non-performing loans in 2024 will be stronger, and the types of banks with the greatest disposal pressure are urban commercial banks and rural commercial banks. AMC respondents generally believe that the scale of non-performing assets launched by banking financial institutions in their regions will increase in 2024. In the context of the phased decline in the supply of non-performing assets in the primary market and the increase in the proportion of small and medium-sized banks' asset portfolios, the market share of local AMCs is rising.
Liao Hekai, an analyst at Jinle Function, said that since 2022, many policies have been introduced to encourage AMC to actively participate in risk mitigation in key areas, and the assets involved in small and medium-sized financial institutions and the real estate market are large, and related risks may be transmitted to other financial institutions, expanding the scope and impact of financial risks, and related risk resolution is directly related to the stability of the financial system and the healthy development of the overall economy. Subsequently, the acquisition and disposal of financial non-performing assets will continue to increase. After returning to the main business of non-performing assets, AMC will focus more on the acquisition, disposal and management of non-performing assets, and improving quality and increment will be the development trend of the industry for a long time in the future.
Beijing Business Daily reporter Li Haiyan