Text/Chinese Zhang Xuechun, deputy director of the Research Bureau of the Min min bank, and Zhong Zhen, associate researcher of the Financial Research Institute of the min min bank of Chinese
In recent years, the risks of small and medium-sized banks in China have gradually surfaced, and their root cause lies in the lack of corporate governance. As an important financial legal system construction, improving the corporate governance of small and medium-sized banks is the starting point for resolving the risks of small and medium-sized banks, and it is also a must for winning the battle to prevent and resolve major financial risks. Corporate governance of small and medium-sized banks is not only a micro-institutional issue, but also a systematic project that is compatible with a country's economic and financial reform process and the development of the financial system.
Corporate governance is the core content of the modern enterprise system. Compared with general enterprises, bank corporate governance has industry particularities. Internationally, banking risks and even financial crises caused by bank corporate governance deficiencies occur from time to time, and strengthening bank corporate governance and strengthening corporate governance supervision have become the common choice of banks and regulatory authorities around the world. In China, in recent years, the risks of small and medium-sized banks have gradually surfaced, and their root cause lies in the lack of corporate governance. As an important financial legal system construction, improving the corporate governance of small and medium-sized banks can be used as a starting point for resolving the risks of small and medium-sized banks, and it is also a must to win the battle to prevent and resolve major financial risks. In this regard, the Party Central Committee and the State Council attach great importance to it, and the Financial Stability and Development Committee of the State Council has focused on small and medium-sized banks at three consecutive meetings, of which the ninth meeting specifically pointed out that it is necessary to deepen the reform of small and medium-sized banks, improve the corporate governance structure and risk internal control system that adapts to the characteristics of small and medium-sized banks, and solve the institutional mechanism problems of the development of small and medium-sized banks from the root. In the next step, it is necessary to implement the spirit of the Fourth Plenary Session of the Nineteenth Central Committee of the Communist Party of China, consciously put the corporate governance construction of small and medium-sized banks in the overall situation of promoting the modernization of the national governance system and governance capabilities, make up for the shortcomings of the system, and promote the long-term and steady development of small and medium-sized banks.
The particularity and importance of corporate governance in small and medium-sized banks
Compared with general enterprises, bank corporate governance has industry particularities
One is the huge negative externalities. A bank is a kind of financial institution that directly operates monetary funds, and its operating assets are mainly derived from deposit liabilities, which have a high degree of leverage, endogenous vulnerability and huge negative externalities. The collapse of a general enterprise is only a limited number of shareholders and creditors of the company directly suffer losses, while the collapse of the bank will affect the public's confidence in other banks, produce a "domino effect" in the entire financial system, affect all depositors, and even have a major impact on economic and social stability.
Second, the governance goals are relatively special. The goal of bank corporate governance is not only to maximize shareholder value, but also to focus on the collection of multiple goals of creditors, managers and employees, and stakeholders related to the bank, such as the government, which is more complex than the average enterprise and faces more complex conflicts of interest. In other words, the goal of bank corporate governance is to focus on both profitability and the liquidity and safety of assets.
Third, the principal-agent relationship is more complicated. Unlike ordinary enterprises, due to the large stakeholder group, the serious information asymmetry is more extensive, and the principal-agent relationship is more complex. Specifically, it is manifested between banks and external investors (including shareholders and depositors), banks and lenders, banks and depositors, shareholders and management, controlling shareholders and small and medium-sized shareholders, which greatly increases the difficulty of corporate governance of banks.
Compared with large banks, the corporate governance of small and medium-sized banks in China has important practical significance
First, the risk negative externality is large, and it is easy to form regional risks. The concept of small and medium-sized banks is relative to that of large banks, which is itself a dynamic concept, and the measurement standards are different in different periods. In China, the concept of small and medium-sized banks also does not have a unified caliber, which is roughly divided into two definitions: one refers to other banking financial institutions other than large commercial banks. This definition was used more in the early stages of the development of small and medium-sized banks; the other refers to other banking financial institutions other than large commercial banks and joint-stock commercial banks, mainly including urban commercial banks, rural commercial banks, rural cooperative banks, rural credit cooperatives, village and town banks, and private banks. This definition is currently more widely accepted. Since the State Council issued the notice on the establishment of urban cooperative banks (later renamed city commercial banks) in 1995, a large number of local small and medium-sized banks, namely urban commercial banks, have been established on the basis of urban credit cooperatives. Since then, small and medium-sized banks have begun to move towards the historical stage, increasingly becoming an important part of the banking system, the main force serving the local economy, and the main force supporting small agricultural support, inclusive finance and financial poverty alleviation. In view of the fact that the development of small and medium-sized banks is closely related to the resource endowments and economic and social development of the region, the economic, social and cultural level of the region determines its business level and risk characteristics, coupled with the cross-regional operation of some banks in recent years, relying on interbank liabilities to support rapid expansion, the risks of small and medium-sized banks have begun to be exposed, and credit risks, liquidity risks and market risks have gradually emerged. These characteristics often lead to a new "domino effect", that is, the risk of a small and medium-sized bank in the region or similar business characteristics may affect public confidence in other small and medium-sized banks, and if it is not intervened in time, it is easy to form a regional risk. It is worth noting that the risk of small and medium-sized banks is the result of years of not being corrected in time, which is the reason for the risk disposal, rather than the additional risk brought about by the risk disposal. If the risk disposal measures are not taken in a timely manner at present, it may lead to an accelerated accumulation of risks, and the future disposal will be more difficult.
Second, the governance goals are relatively diverse, and the principal-agent relationship is relatively complex. Compared with large banks, local governments often have the dual roles of shareholders and local economic and financial macro managers, and the impact on the corporate governance of small and medium-sized banks cannot be ignored. In recent years, some large private enterprises represented by various "departments" have taken shares in small and medium-sized banks, abused the rights of major shareholders, and encroached on the interests of banks and small and medium-sized shareholders, which have greatly distorted the governance goals and entrustment-agency relationship of small and medium-sized banks and increased the difficulty of corporate governance.
Third, under the new normal of the economy, the corporate governance challenges of small and medium-sized banks have increased unabated. In recent years, China's economy has shifted to the new normal of the economy characterized by medium and high-speed growth, and has entered a stage of high-quality development. In this context, the risks and structural contradictions of small and medium-sized banks in the past, which were covered by the rapid expansion of quantity, have gradually been exposed. Compared with large banks, there are obvious gaps in business philosophy, risk control, internal management, business capabilities, personnel quality, governance level and other aspects of small and medium-sized banks, further accumulating risks. In addition, small and medium-sized banks are an important source of financing for local financing platforms (loans, non-standard, urban investment bonds, etc.), and the quality of local government debt has a greater impact on the asset quality of small and medium-sized banks. With the acceleration of interest rate marketization and the rapid development of Internet financial innovation and disintermediation, due to the dispersion of customers and weak scientific and technological strength, the diversion of funds from small and medium-sized banks has become more obvious, and corporate governance is facing great challenges.
At present, the root cause of the risk of small and medium-sized banks in China lies in the lack of corporate governance
Effective corporate governance is an important cornerstone for the long-term and steady development of small and medium-sized banks. In recent years, many of the risks exposed by small and medium-sized banks, traced back to their origins, are inseparable from the imperfection of corporate governance or the failure of operation.
First, the problem of "invisible" governance structures brought about by imbalances in organizational structure. The organizational structure is a series of institutional arrangements such as the division of the bank's organizational level, the allocation of rights and responsibilities, and the transmission of internal information, and the organizational structure of "both form and god" is the institutional guarantee for the effective operation of corporate governance. Judging from the actual situation, China's small and medium-sized banks have basically established a corporate governance structure of "three meetings and one layer" (shareholders' meeting, board of directors, board of supervisors and senior management), but the problem of "form and god" has not been effectively corrected for a long time, and there is still a certain gap with the requirements of "each taking its own responsibility, coordinating operation, and effective checks and balances". The corporate governance structure of some small and medium-sized banks is useless, the supervision and balance of the "three associations and one layer" is in the form, the color of human governance is strong, mainly relying on the authority of the number one leader and the will of the chief officer rather than relying on the system to maintain, the key management decisions are controlled by a small number of people, and the independent directors and the board of supervisors have not played an effective role in supervision and checks and balances. Some banks also face interference from local governments and controlling shareholders, which causes certain troubles to the normal performance of their boards of directors. The internal evaluation mechanism is not scientific, and the performance appraisal emphasizes performance over risk. The remuneration system is unreasonable, and no mechanism for deferred payment of remuneration and accountability mechanism for losses has been established.
Second, the imbalance in equity structure brings about the lack of effective checks and balances in corporate governance. Equity is the root cause of corporate governance problems, and a good equity structure is the premise for achieving effective corporate governance. From the perspective of theory and practice, there are two main imbalances in the equity structure: one is the excessive concentration of equity, the failure of equity checks and balances, and the formation of major shareholder control; the other is the excessive dispersion of equity, resulting in a lack of supervision of the power of senior management and the emergence of insider control. Judging from the reality of our country, these two situations are more or less reflected in some small and medium-sized banks. On the one hand, the momentum of major shareholder control and even wanton disorderly behavior has increased. In recent years, some small and medium-sized banks have frequently experienced abnormal equity events, individual shareholders have impure motives for entering the shares, and after entering the shares, they have ignored the law, either through illegal capital operations and equity arrangements to obtain control, interfere in bank operations, and then abuse shareholders' power to cause damage to the interests of banks; or use banks as "cash machines" to arbitrage bank funds through illegal interbank investments, related loans, and repeated pledges of equity, and some have formed a large number of non-performing loans, endangering the safety of depositors' funds and the stability of the financial system. On the other hand, insider control problems are more prominent. The primary goal of corporate governance is to solve the problem of entrustment and agency arising from the separation of ownership and operating rights of enterprises. In China, the property rights system and equity structure of small and medium-sized banks have certain particularities. Some stem from historical reasons, local finance and state-owned enterprises still occupy an absolute controlling position among small and medium-sized banks; some small and medium-sized banks are highly dispersed in equity and lack substantial controlling shareholders. These can easily lead to "owner absence" and breed insider control problems.
Third, the imbalance in information structure brings about insufficient internal and external constraints. The G20/OECD (OECD) Principles of Corporate Governance include "disclosure and transparency" as one of the six core principles, arguing that "the corporate governance framework should ensure timely and accurate disclosure of all important matters of the company." In addition to the company's financial and operating performance, non-financial information, related party transactions, etc. should also be disclosed." From the perspective of domestic and foreign practice, ensuring information disclosure and transparency mainly relies on the internal information disclosure mechanism, as well as the government supervision of regulatory departments and social supervision mainly by intermediary institutions. On the one hand, the information disclosure mechanism of small and medium-sized banks in China has not yet been fully established. First, the content is not comprehensive enough. In order to avoid risks, some small and medium-sized banks have not fully and effectively disclosed major matters involving bank operations in accordance with relevant regulations, such as equity information, financial status, remuneration, risk status, major matters and other information. Second, the disclosure is not timely enough. Some banks do not have a strong initiative in disclosing major matters, and often postpone disclosure or do not disclose. Third, the information is not accurate enough. A small number of banks have violated the law by concealing or even tampering with major matters and key information. On the other hand, the external regulatory environment for information disclosure of small and medium-sized banks needs to be further improved. Compared with the international mature market, the external supervision of information disclosure of small and medium-sized banks in China has shortcomings such as overly simple regulatory rights and responsibilities, failure to clarify the main regulatory system, different leniency and severity of information disclosure supervision between listed and unlisted commercial banks, information disclosure supervision of some unlisted commercial banks has not yet been included in the regulatory agenda, low regulatory law enforcement techniques and means, imperfect regulatory information exchange mechanisms, and incomplete roles of intermediary institutions, and failed to form effective external constraints.
Fourth, the problem of stock risk and incremental risk caused by the imbalance of risk structure coexists. The essence of a bank is an enterprise that operates risks, and risk management is also an important part of the corporate governance of banks. From the perspective of risk structure, resolving historical stock risks and preventing incremental risks in development have become difficulties in corporate governance of small and medium-sized banks in China. On the one hand, the historical burden is heavy, and the stock risk is concentrated and exposed. Some small and medium-sized banks, especially rural credit cooperatives, started their risk management late, with heavy historical burdens, no essential changes in corporate governance and internal control mechanisms, and poor anti-risk ability. In the process of restructuring, some rural commercial banks have transferred non-performing loans off-balance sheet by borrowing new loans to repay the old, restructuring loans, false transfers, etc., and have not completely disposed of and resolved the existing risks, and the operating conditions have deteriorated, and some areas have reflected that the effect of the restructuring of rural credit cooperatives is poor, and the phenomenon of "resurgence" of risks is prominent. On the other hand, the blind pursuit of scale growth, incremental risks are becoming increasingly prominent. First, the problem of market positioning going astray. Some small and medium-sized banks have deviated from the market positioning of supporting agriculture and small in their development, "leaving their hometowns and going to the city", taking out loans to large households, engaging in the same industry, and making quick money. Some small and medium-sized banks have taken advantage of their credit business, their risk appetite is too high, they have re-placed their light management, and the characteristics of de-agriculturalization and large-scale amounts have emerged. The second is the issue of time limit mismatch. Some urban commercial banks account for a high proportion of interbank business, liquidity is highly dependent on the interbank market, such as Baoshang Bank and other interbank liabilities accounted for about 40% of the total liabilities, some interbank financing concentration of more than 50%, some as high as 100%, and some banks in order to avoid loan scale, capital occupation and other regulatory requirements, a large number of off-balance sheet business, accumulated greater risks.
Improving the corporate governance of small and medium-sized banks in China is a systematic project
Traditionally, the understanding of corporate governance has been based more on an analytical framework at the micro-institutional level. However, from the perspective of financial stability, corporate governance of small and medium-sized banks is not only a micro-institutional issue, but also a systematic project that is compatible with a country's economic and financial reform process and the development of the financial system. From the perspective of Chinese practice, there are four major relationships that will profoundly affect the construction of this system project, thus affecting the effectiveness of corporate governance of small and medium-sized banks.
The relationship between small and medium-sized banks and large banks
Behind the relationship between small and medium-sized banks and large banks, it is not only related to the market positioning of these two types of banks, but also involves the structural design of the entire financial system. These problems have profoundly affected the development direction of corporate governance of small and medium-sized banks. From a theoretical point of view, compared with large banks, small and medium-sized banks are more likely to obtain the "soft information" generated by small and medium-sized enterprises through long-term cooperative relations between banks and enterprises, so as to obtain the information advantage of financing services for small and medium-sized enterprises. From the perspective of international practice, in terms of market positioning, the relationship between small and medium-sized banks and large banks is not one or the other, but complements each other and takes advantage of each other's strengths. A more mature and perfect financial system should be a positive pyramid structure, that is, at the top is a small number of large banks, and the bottom should be a certain number of small and medium-sized banks as the cornerstone. In the United States, for example, its financial architecture is the result of long-term survival of the fittest under market competition. The small and medium-sized banks in the United States, represented by community banks, have a large number and wide distribution, and the service objects are mainly small and medium-sized enterprises and local residents, and the business operation is also based on traditional credit. In contrast, the market positioning of small and medium-sized banks in China has a strong policy planning color, rather than the result of market choice. In addition, for a long time, we have not provided enough policy support and supporting measures that match the market positioning of small and medium-sized banks. Of course, there are also some problems such as the relatively relaxed policy environment in the early stage, improper intervention by local governments, and the banks' own demands for profits. All this has led to the unclear market positioning of China's small and medium-sized banks, almost "copying" or "following" large banks. In terms of regional expansion, it is positioned in central cities and economically developed areas; in terms of serving customers, it is positioned in large enterprises such as transportation, electricity, and listed companies; in terms of business development, it is either homogeneous operation, positioned in the capital wholesale business and public business, or blindly following the market and relying on the same industry; product design, research and development level and business philosophy are backward, and there is convergence in product innovation, lacking its own characteristics. It can be seen that if the relationship between small and medium-sized banks and large banks cannot be corrected from the root causes, supplemented by necessary policy support, the market positioning of small and medium-sized banks will not be able to return to their own positions, and the effective operation of corporate governance will also be restricted.
The relationship between small and medium-sized banks and shareholders
The relationship between small and medium-sized banks and shareholders, which is specifically reflected in corporate governance, can be briefly summarized as "three capitals", that is, capital, capital and qualifications.
One is capital. The peculiarity of the bank's business development lies in the need for continuous capital replenishment. In China, the channel for capital replenishment of small and medium-sized banks is relatively single, and more need to rely on the continuous capital increase ability of shareholders. However, in the economic downturn stage, the development of shareholders, especially the development of entity enterprises, is not optimistic, and even their own cash flow is difficult to sustain, and they cannot meet the capital supplement demand generated by the blind growth of small and medium-sized banks in the early stage. In addition, it is not excluded that in the process of the establishment, restructuring and expansion of small and medium-sized banks, minority shareholders have committed illegal acts such as false capital injection and circular capital injection.
The second is funding. Maintaining the safety of bank funds is actually to protect the interests of depositors, and naturally should become one of the goals of bank corporate governance. In China, related party transactions have become a common means for small and medium-sized banks to be "hollowed out". As a special kind of transaction, related party transactions are theoretically a neutral economic behavior, which has advantages and disadvantages for stakeholders. It is not advisable to completely prohibit related party transactions, but if it is not restricted, there will be problems such as profit adjustment, profit transmission, capital occupation, and damage to the interests of small and medium-sized shareholders. Therefore, related party transactions must be effectively regulated from inside and outside, and their information disclosure should become the top priority of supervision.
The third is qualifications. Regarding shareholder qualifications, in addition to the regulations of the regulatory authorities, more attention should be paid to how to "grasp both hands" through positive incentive guidance and negative disciplinary constraints, and transform external hard constraints into internal soft constraints of the entire industry's moral norms. Only by making the concept of true corporate governance deeply rooted in the hearts of the people and enhancing the overall corporate governance awareness of the banking industry can we cultivate qualified small and medium-sized bank shareholders in the true sense. It can be seen from this that it is not enough to manage the "three capitals" and rely only on the self-discipline of small and medium-sized banks, and the regulatory authorities must "grow teeth", dare to move and really touch the hard, not afraid of offending people, and not be a "scarecrow".
Relations between small and medium-sized banks and local governments
The relationship between small and medium-sized banks and local governments is a characteristic problem in the corporate governance practice of small and medium-sized banks in China. In practice, local governments more or less control the corporate governance of local small and medium-sized banks, thus producing a dual effect. On the one hand, there is a mutually beneficial effect between the two sides. This kind of shelter from local governments is equivalent to providing explicit or implicit guarantees for small and medium-sized banks, which is conducive to enhancing the credibility of banks, expanding sources of funds, and expanding customer channels. At the same time, local governments can also enjoy the dividends of the development of small and medium-sized banks, obtain tax revenues, solve local employment, and if necessary, use the resources of small and medium-sized banks to reduce historical burdens and resolve local financial risks. On the other hand, there is a conflict of objectives between the two sides. The administrative objectives of local governments are often inconsistent with the business objectives of small and medium-sized banks, which will make the corporate governance operation mechanism of small and medium-sized banks more complicated. If local governments intervene in the development of small and medium-sized banks in the dual roles of shareholders and local economic and financial macro managers, it is easy to lead to administrative intervention, and small and medium-sized banks may easily violate the principles of market economy in operation and management, disregard risks, and excessively support local economic development. Local governments will even intervene in the process of shareholder selection, "directors, supervisors, and high" recommendations, selection, and assessment. In the restructuring or capital increase and share expansion of local small and medium-sized banks, a small number of local governments strongly dominate key matters such as shareholder selection, shareholder structure and equity ratio, and equity standard management; some banks still adopt the method of local government administrative appointment in the appointment of "directors, supervisors and high".
The relationship between small and medium-sized banks and the external environment
The survival and development of small and medium-sized banks cannot be separated from the external environment, and the same is true for the corporate governance of small and medium-sized banks. A good external environment can promote corporate governance of small and medium-sized banks, and vice versa. In addition to the economic, political, cultural and technological environment, the institutional environment composed of the regulatory environment, the legal environment and the policy environment has become a key factor affecting the corporate governance construction of small and medium-sized banks in China. Judging from the risks exposed in the early stage, institutional environmental problems such as weak external supervision, weak supervision and law enforcement, poor credit environment, insufficient scientific accounting and tax policies, and imperfect market competition mechanisms may constitute shortcomings in corporate governance of small and medium-sized banks.
Some suggestions for improving the corporate governance of small and medium-sized banks in China
First, improve the corporate governance organizational structure of small and medium-sized banks, and promote the organic integration of party building and corporate governance. Clarify the division of responsibilities and labor of the "three associations and one level", strengthen coordination, cooperate with each other, assume their own responsibilities, perform their duties, do not overstep their positions, do not lack positions, and form a joint force for corporate governance. Improve management mechanisms, clarify the performance requirements and evaluation standards for the board of directors, boards of supervisors, and senior management, and strengthen the pursuit of responsibility for dereliction of duty. Strengthen risk governance and improve the internal control system. Develop a sustainable profit distribution policy that maximizes shareholder value while taking into account the interests of other stakeholders, such as customers, employees, and the public. Adhere to the principle of unifying incentives and constraints, set up scientific and reasonable evaluation indicators, and establish an appraisal mechanism that links the remuneration of senior managers with responsibilities, risks, and business performance. Give full play to the positive role of party organizations in corporate governance, smooth the communication and coordination mechanism between party organizations and the board of directors, boards of supervisors, and senior management, and establish a mechanism for selecting and employing people that meets the requirements of the modern enterprise system and the needs of market competition.
Second, strengthen shareholder management and further optimize the equity structure of small and medium-sized banks. Strengthen shareholder management, small and medium-sized banks should take the strategic concept and development culture as an important inspection content when selecting shareholders, achieve the consistency of behavior with the same development strategy and concept culture, strictly review, strictly require and carefully verify that the invested funds are their own funds, put the qualifications of major shareholders into the customs, and strengthen the penetrating management of shareholders and actual controllers. Standardize the behavior of shareholders, clarify the boundaries of the main responsibility, prevent the problems of "one share dominating" and insider control, and strive to solve the problems of "offside" and "absence" of shareholders. According to the principle of separating ownership and management rights, the matters that should be decided by the institution independently according to law are attributed to the institution, and the shareholders shall not interfere in the daily operation of the institution beyond the board of directors or senior management. Resolutely liquidate the problem shareholders and take punitive measures in accordance with law. Optimizing the shareholding structure can encourage integration among financial institutions and enrich the source of high-quality shareholders. While introducing funds, we should focus on improving the governance structure and improving governance capabilities. In addition, small and medium-sized banks should further change their development concepts, adapt to the general trend of the economy shifting from high-speed growth to high-quality development stage, shift from epitaxial expansion to connotative development, and take the road of capital-saving development. Regulators should innovate capital replenishment tools, improve the channels for small and medium-sized banks to replenish capital through financial markets, and reduce their dependence on equity capital.
Third, standardize the information disclosure system and continuously improve information transparency. Strengthen the initiative, pertinence and effectiveness of information disclosure, ensure that investors can understand the bank's operation in a timely and comprehensive manner, so as to give full play to the positive role of market constraints on bank corporate governance. In view of the current situation that most small and medium-sized banks are unlisted, the quality of information disclosure should be continuously improved to ensure the authenticity, accuracy and completeness of information disclosure, and to improve the timeliness and professionalism of information disclosure. The G20/OECD Principles of Corporate Governance can be followed to require small and medium-sized banks to disclose more critical non-financial information and corporate governance operations in addition to regulatory requirements.
Fourth, small and medium-sized banks should clarify their market positioning and highlight their own characteristics. The market positioning of small and medium-sized banks should focus on the main business, effectively return to the roots, and better support the development of the real economy. In terms of goals, small and medium-sized banks should develop characteristic businesses according to regional characteristics and their own advantages, adhere to the original intention of serving the regional economy, local economy, small and micro enterprises and urban and rural residents, seek their own differentiated positioning, and create a unique core competitive advantage. In terms of business, we should combine the characteristics of our own endowments and the characteristics of local economic development, take the initiative to dock with the local economic development strategy, promote the innovation of product and service models, carry out characteristic financial models, deeply cultivate local and sink services, and strengthen community and county financial services. Small and medium-sized banks should aim at the strategic positioning of serving small and micro enterprises, as the backbone of serving small and micro enterprises, and constantly solve the bottleneck of development of small and micro enterprises with difficult and expensive financing. In terms of technology, we will make full use of network technology, big data, cloud computing and artificial intelligence to improve the efficiency of financial services and risk identification capabilities. Through cooperation with Internet platform enterprises, expand customer channels through online diversion, adopt automation, batch, and big data approval mode, improve approval and lending efficiency, and provide personalized services based on customer data.
Fifth, optimize the external environment and provide support for the corporate governance construction of small and medium-sized banks. First, at the policy level, it is necessary to start from improving the financial system structure of our country, promote the innovation of institutional mechanisms, and guide small and medium-sized banks to take root in the local market positioning. Strengthen the construction of the credit reporting system, reduce taxes and fees for specific types of small and micro financial institutions, give full play to the role of directional tools, and create a good policy environment for the development of small and medium-sized banks. Relevant departments are required to establish and improve the social credit system, improve the availability of corporate financial and credit data, and provide information support for the comprehensive risk management of small and medium-sized banks. The second is at the regulatory level, on the one hand, to make up for the shortcomings of the system. It is necessary to further standardize the corporate governance supervision of small and medium-sized banks, especially for small and medium-sized banks with imperfect corporate governance, irregular management of shareholders' equity, inadequate implementation of comprehensive risk management and internal control requirements, and problems in handling credit business in violation of regulations and disposing of non-performing assets and off-balance sheet business, interbank business, and wealth management business. Strengthen information disclosure supervision, strictly enforce market discipline, and strengthen market constraints. All kinds of market intermediaries should fully perform their duties, and the management department should inspect and evaluate the performance of intermediary agencies. Increase penalties for enterprises and personnel that violate laws and regulations, and improve mechanisms for joint disciplinary action for untrustworthy conduct. On the other hand, differentiated policy incentives are implemented. For small and medium-sized banks that adhere to their positioning and serve the local area with remarkable results, further reduce the reserve requirement ratio in a timely manner, and give the necessary regulatory tolerance, deposit pricing power and fiscal and tax support. Improve the policy for the bulk transfer of non-performing assets, and simplify the procedures for the write-off of non-performing loans. The third is the role of local governments. Local governments should earnestly assume their territorial responsibilities and make overall plans for the deepening of reform and risk mitigation of small and medium-sized banks in their respective regions. Deepen the reform of local governments and state-owned assets, promote the transformation of local governments into real investors, shift from direct administrative intervention in the past to investor management within the framework of corporate governance, and continue to improve the degree of marketization of corporate governance of small and medium-sized banks.
This article was published in the February 2020 issue of Tsinghua Financial Review and published on February 5, 2020, by Xie Songyan
