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As the continuous advancement of financial supply-side structural reforms takes place, the liability structure of financial institutions, especially listed ones, is continuously optimized. The improvement in asset quality provides ample "ammunition" to fend off financial risks. Behind this, there is both the strict supervision by financial regulatory authorities, playing the role of regulatory guidance, and guiding financial institutions to operate stably internally. Additionally, financial institutions are expanding multi-channel exogenous capital replenishment tools, increasing capital and issuing bonds to strengthen their capital strength.

Looking ahead, the financial system still has a solid foundation for stable operation. To promote precise reform and risk resolution in small and medium-sized financial institutions, it is necessary to anticipate interest rate risks, enrich the "toolbox" for crisis management, and build a multi-faceted financial security network.

The financial system is generally operating stably. The economy is the body, and finance is the blood vessels. The economic recovery and improvement provide strong support for the stable operation of finance. The latest research report from the Bank of China Research Institute points out that since the beginning of this year, the insurance industry, securities industry, and fund industry have operated in a compliant and stable manner, creating a good financial industry environment together with the banking industry.

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The assets of the banking industry continue to grow, and the role of state-owned large commercial banks as the "main force" and "ballast stone" is further consolidated. By the end of August, the total domestic assets of banking financial institutions reached 426.57 trillion yuan, a year-on-year increase of 7.2%. Among them, the total domestic assets of state-owned large commercial banks reached 179.70 trillion yuan, a year-on-year increase of 9.3%.

The insurance industry fully plays the role of an economic shock absorber and social stabilizer. In the first eight months of this year, the original insurance premium income of the insurance industry was 4.38 trillion yuan, and the industry's total original insurance premium income increased by 7.5% year-on-year. In terms of compensation, the original insurance compensation expenditure of the insurance industry in the first seven months was 1.55 trillion yuan; comparable口径, the original insurance compensation expenditure increased by 26.1% year-on-year.

The ability of the securities industry to resist risks has steadily increased. The four core risk control indicators of risk coverage ratio, capital leverage ratio, liquidity coverage ratio, and net stable funding ratio have long been maintained at 1.5 to 2.5 times the regulatory standards. The industry continues to develop steadily without any major risk events. Among them, the risk resistance of leading securities firms has increased more obviously. Among the top ten securities firms in terms of performance, most of them have improved their liquidity risk control indicators in the first half of this year compared to 2023.

The financial system is stable overall, and listed financial institutions show more operational resilience. Taking the banking industry as an example, the 2024 semi-annual report of 42 listed banks on the A-share market shows that in the first half of the year, the non-performing loan ratio of listed banks generally showed a downward trend, and asset quality has improved. Among them, 19 had a decrease in the balance of non-performing loans, 13 had a decrease in the non-performing loan ratio, and many had the same non-performing loan ratio as the previous quarter.

Joint efforts inside and outside build a solid risk bottom line. "Adhere to deepening financial supply-side structural reforms, guide financial institutions to establish the correct view of political achievements and development, focus on the main business, and practice internal skills. Further transform to connotation and refined management, and promote high-quality and sustainable development of the industry." Xiao Yuanqi, Deputy Director of the Financial Regulatory Authority, pointed out recently.From the perspective of the banking industry, the intensity of non-performing asset disposal has been further increased. In the first half of this year, banks disposed of non-performing assets worth 1.4 trillion yuan. The risk compensation has been steadily increasing, and as of the end of July, the loan provision coverage ratio of banks reached 216.7%, which means that the loan loss provisions are more than twice the amount of non-performing loans.

Wang Jian, the Chief Analyst of the Financial Industry at Guoxin Securities, analyzed that the maintenance of bank asset quality is attributed to the supply-side structural reforms in the previous years, which reduced the debt levels of traditional industries. At the same time, in recent years, the banking industry has increased the disposal and write-off of existing non-performing assets, leading to a reduction in the leverage levels of borrowers. In addition, although risks have been exposed in some areas such as real estate, the overall proportion is not high. Coupled with the decline in risk preference for bank credit allocation, the overall quality of bank assets has remained stable.

In terms of the capital market, a veteran investment banking professional stated that in recent years, the China Securities Regulatory Commission (CSRC) has continuously improved the risk control indicator system centered on net capital and liquidity, urging securities companies to implement comprehensive risk management requirements and to strengthen the foundation of internal control and compliance. At the same time, strict regulation has been applied to压实各方责任, promptly discovering and dealing with institutions and practitioners with issues, and incorporating all business activities of securities companies into the scope of constraints. By supporting the strong and restricting the weak, and implementing classified supervision, the overall practice quality of the industry has been improved.

"A series of regulatory measures have urged the securities industry to effectively strengthen internal controls, fulfill the responsibility of verification and control, appropriately expand the capital space of high-quality securities companies, improve the efficiency of capital use, and become a strong force in serving the real economy and a ballast stone in maintaining market stability," said the professional.

Practicing internal skills and firmly establishing asset quality barriers, externally "replenishing blood" to enrich the source of stable operation.

Since the beginning of this year, banks and insurance institutions have further consolidated their capital strength through means such as debt issuance and capital increases, while maintaining a high level of capital adequacy ratio. According to the statistical data of East Money Choice, as of September 30, this year insurance institutions have issued a total of 11 capital supplementary bonds and perpetual bonds, with a total issuance amount of 79.8 billion yuan; commercial banks have issued a total of 228 financial bonds (including ordinary bonds, subordinated bonds, perpetual bonds, and TLAC non-capital bonds), with a total issuance amount of 2.33 trillion yuan.

Risk Management of Small and Medium-sized Banks

Need to Pay Attention to Liquidity

Preventing and resolving financial risks, especially preventing systemic financial risks, is the fundamental task of financial work and an eternal theme. At present, high-risk institutions continue to converge, and financial risks are generally controllable. However, progress in reform and risk resolution in some key areas still needs continuous attention.

Zhong Desheng, the Vice President of China Merchants Bank, recently stated at a performance briefing that in the next stage, the complexity and uncertainty of the operating environment faced by real estate still exist, and the challenges of risk management are also increasing.Zhejiang Commercial Bank's Chief Assistant and Chief Risk Officer, Pan Huafeng, also pointed out that, influenced by the current economic environment and the previous decline in housing prices, the upward trend in credit risk for some small and micro enterprises and retail customers continues, which is one of the sources of risk pressure on asset quality.

The latest research report from the Bank of China Research Institute suggests that next, small and medium-sized financial institutions should take a forward-looking approach to prevent interest rate risks and optimize asset-liability management. At the same time, the policy level should strengthen support for small and medium-sized banks. This includes accelerating the improvement of the financial stability guarantee fund mechanism, coordinating with the deposit insurance fund and industry guarantee funds to form a two-tier operation system and build a financial security network together; enriching the "toolbox" for crisis management, exploring the establishment of a "Commercial Bank Liquidity Assistance Plan" mechanism in a forward-looking manner, diversifying the raising of funds, and focusing on temporary liquidity risk assistance for small and medium-sized banks, among other areas.

In response to the continuous innovation in the business models of the securities industry and the increased complexity of business operations, the China Securities Association has recently revised the "Comprehensive Risk Management Standards for Securities Companies" and drafted the "Guidelines for Market Risk Management of Securities Companies" (draft for comments), further improving the industry's comprehensive risk management self-discipline rules system. This includes detailing and strengthening risk management for subsidiaries and overseas subsidiaries, and dedicating chapters to regulate and strengthen areas with more difficult risk management, such as new business management, the same business with the same customer, off-balance-sheet business, and over-the-counter business.