IPP Commentary is the official WeChat platform of the Institute of Public Policy (IPP) of South China University of Technology, a national high-end think tank
Lead:
In 2004, Chongqing, as an emerging municipality and the economic center of the upper reaches of the Yangtze River, was facing severe financial risks. A number of local financial institutions are on the verge of bankruptcy and are in deep financial trouble, with a surge in bad debts and capital depletion, which has brought great instability to Chongqing's financial system.
Huang Qifan, then vice mayor of Chongqing, used the "three-pronged" rescue plan of debt restructuring, asset restructuring and shareholder restructuring to effectively respond to the crisis through systematic resource allocation, and also provided new ideas for local governments to resolve risks in key areas.
*The content of this article is excerpted from Huang Qifan's new book "Restructuring and Breakthrough"
"Finance is the lifeblood of the real economy." For a new municipality like Chongqing, a metropolis that is building an economic center in the upper reaches of the Yangtze River, finance is crucial. But in 2004, shortly after I arrived in Chongqing, several local financial institutions in Chongqing were on the verge of bankruptcy. First of all, it is manifested as a lot of bad debts. Chongqing Rural Credit Cooperative, 30 billion yuan of loans, 18 billion yuan of bad debts, capital of only 200 million yuan. Chongqing Commercial Bank (hereinafter referred to as Chongqing Commercial Bank) has more than 7 billion yuan of loans, more than 3 billion yuan of bad debts, and only 300 million yuan of capital. Southwest Securities, with a capital of 1.6 billion yuan, has a nominal net asset of 200 million yuan on the account, but in fact there are three holes: first, a major shareholder from other places initially invested 500 million yuan, but it was all withdrawn after a few months; second, embezzled and misappropriated more than 1 billion yuan of customer deposits; Third, the litigation assets amounted to 1.27 billion yuan, and the actual losses had already exceeded 1 billion yuan; in addition to the normal operating losses, Southwest Securities had dug a big hole of more than 5 billion yuan for Chongqing Municipality.
The second is the cash flow breakdown. These financial institutions are basically not creditworthy, and a run can occur at any time. At this point, a single "straw" can crush these financial institutions to death.
In the face of the above two situations, is it helpless and resigned, or is it divided into categories and measures? To save or not to save? At that time, the opinions were not unified, and I analyzed and weighed the opinions of the pros and cons, and thought that it was still necessary to save them. There are three reasons for this.
First, although these financial institutions were very small at the time, they were the cornerstone of Chongqing's local financial system.
Second, the bankruptcy of these financial institutions will bring social instability.
Third, the government has to spend money to save or not to save. Letting them go bankrupt and close down is equivalent to "running a funeral", and the people's tens of billions of yuan in deposits must be repaid, and the shareholders' deposits must also be repaid. Instead of spending money on "funerals", it is better to spend money on "happy events". Reorganization is to "do happy events", spend money on curing the disease, cure the disease, and all parties benefit.
The treatment is a "three-pronged approach".
The first is debt restructuring and stripping bad debts. The reason why financial institutions cannot sustain themselves must be because there are too many bad debts and they owe a lot of debts that cannot be paid off.
The second is asset restructuring, capital injection, and additional investment.
The third is the reorganization of shareholders and the adjustment of the corporate governance structure. After the change in the structure of the legal person, it usually means the adjustment of the leading body of the enterprise, and the newly added capital will naturally use the power of capital to remove the leading group that caused the financial institution to be on the verge of bankruptcy.
1. Restructuring of Southwest Securities
At the beginning of March 2005, the Chongqing Municipal Finance Office and the Chongqing Securities Regulatory Bureau both urgently reported to me that there were only about 30 million yuan of available funds left in the accounts of Southwest Securities, and the monthly income was only 7 million yuan, while the monthly expenditure was as high as more than 25 million yuan.
To make the right decision, you must first find out the bottom line. I asked the Chongqing Securities Regulatory Bureau to seriously investigate. The results of the investigation show that there are indeed many serious problems in Southwest Securities, such as the misappropriation of securities, the appropriation of funds by major shareholders, and lawsuits, involving a total of nearly 5 billion yuan, an operating loss of nearly 1.5 billion yuan, and a net book capital of less than 200 million yuan.
The triple significance of restructuring Southwest SecuritiesThe problem of Southwest Securities is very serious, and there is no hope of self-help, does the government lend a hand? To save or not to save, for a time became the focus of attention of all parties.
There are two main opinions advocating "no rescue": the first opinion is the most concentrated, believing that Southwest Securities has been reorganized twice since its establishment, not only is it a serious disease, but also the cost of rescue is too high, and it is meaningless to rescue again; The second opinion is that the closure of enterprises is a normal phenomenon in the market economy and a punishment for those who do not operate well by the market mechanism, and there is no need for the government to intervene and pay for the violators.
The opinion in favor of "rescue" holds that once the problem of Southwest Securities is not properly handled, it will cause many serious consequences. There are three main points: first, the interests of the more than 500,000 securities investors who have opened accounts with Southwest Securities will be harmed, which may lead to various social problems; second, the interests of old shareholders will be harmed; Third, more than 800 employees will lose their jobs. Specifically, there are three major benefits of "saving":
First, it is conducive to the implementation of the central government's major decisions and arrangements for the development of the capital market. The central government attaches great importance to the development of the capital market, and since 2004, the State Council has launched a series of major decisions and arrangements with the "National Nine Articles" as the core. Saving Southwest Securities is a specific action of the Chongqing Municipal Government to resolutely implement the "National Nine Articles" and actively participate in the comprehensive management of securities firms.
Second, it is conducive to reducing the cost of maintaining social stability and establishing a good image of an honest enterprise. For a company like Southwest Securities, which involves institutional investors, small and medium-sized investors, employees, creditors, shareholders and other stakeholders, once it goes bankrupt, the problem will be very complicated. From the perspective of the integrity of the government, the government should take a highly responsible attitude and try its best to solve problems for investors and strive to create a good investment environment.
Third, it is conducive to building an economic center in the upper reaches of the Yangtze River and ensuring regional financial stability. From the perspective of regional financial security, we must come to the rescue. The problem of Southwest Securities is an issue related to the financial security and financial stability of the entire Chongqing region, and if it is not handled well, it will lead to a "financial crisis" in Chongqing.
From the perspective of the domestic economic environment at that time, the "Eleventh Five-Year Plan" economic development momentum continued to improve, with the gradual solution of the problem of equity division, the growth of institutional investors and the recovery of market confidence, after several years of deep adjustment, the securities market is expected to usher in a new round of development cycle, at this time to save Southwest Securities, can be described as a godsend, the right time.
Carry out the most radical restructuring
After careful consideration, I proposed a "three-pronged" treatment plan.
The first is asset and debt restructuring. If you want to save Southwest Securities, you must first carry out asset restructuring and sell some assets to supplement cash flow to solve liquidity problems and save your life. Secondly, it is necessary to carry out debt restructuring and clean up the historical arrears of Southwest Securities, including debt collection and debt repayment.
The second is equity restructuring. Introduce strategic investors, fundamentally improve the equity structure, improve the corporate governance structure and internal control mechanism, and make Southwest Securities bigger and stronger.
The third is to set the long-term goal of striving for listing when the restructuring is successful and the conditions for standardized operation are ripe. The listing is not only the ultimate symbol of the successful restructuring of Southwest Securities, but also an important guarantee for the healthy development of Southwest Securities. Only by going public can we avoid "wearing new shoes and going the old way" and develop and grow in the market competition.
On July 8, 2005, the executive meeting of the municipal government made an important decision to reorganize Southwest Securities. The plan to reorganize Southwest Securities has been supported by relevant state departments. In February 2006, the Chongqing Municipal Government, together with the People's Bank of China and the China Securities Regulatory Commission, formulated a restructuring plan for Southwest Securities and submitted a request to the State Council for instructions on the restructuring of Southwest Securities. The Chongqing Municipal Party Committee and the Municipal Government conscientiously studied, comprehended, and resolutely implemented the spirit of the instructions of the leaders of the State Council, quickly set up a strong working group, set up a leading group for the reorganization of the municipal government with the participation of relevant units at the municipal level, and selected a deputy secretary-general of the municipal government with a strong work style, careful thinking, decisive handling and strong coordination as the leader of the leading group, and at the same time strengthened the leadership of Southwest Securities.
"Three-pronged" implementation of restructuring
In accordance with the spirit of reform and reorganization approved by the State Council and our established "three-pronged" thinking, Southwest Securities' "defense war" began to act.
First, asset and debt restructuring. The imminent problem faced by Southwest Securities is the need to return the misappropriated and misappropriated assets as soon as possible. The question is: where does the money come from? We immediately decided to let Southwest Securities transfer part of its effective assets in exchange for hundreds of millions of yuan, which not only extended the life of Southwest Securities, but also solved the prerequisites for restructuring.
Seizing the time to sort out the problems left over from history is the only way to turn confidence into action. Among them, whether the successful completion of debt collection is not only related to the success or failure of the reform and reorganization of Southwest Securities, but also has become the focus of attention of people from all walks of life. In order to accomplish the work of collecting creditor's rights, the relevant departments of the municipal government, together with the judicial departments, have carried out a large-scale collection work with a resolute attitude, assigning responsibilities to the people, using various methods, and using flexible means. In several key cases, measures have been taken resolutely and resolutely. There is also the daunting task of resolving the outstanding litigation. The pending litigation left by Southwest Securities involved nearly 1.3 billion yuan, of which more than 1 billion yuan was resolved through full negotiation between all parties.
Second, equity restructuring. While taking the initiative to clean up all the assets of Southwest Securities, we communicated with the People's Bank of China and the China Securities Regulatory Commission for many times, and conducted detailed discussions on the method, procedure and timing of the state's capital injection, and finally decided that China Jianyin, a wholly-owned subsidiary of Central Huijin Company, would inject capital into Southwest Securities on behalf of the state.
The most difficult issue in the negotiations is the filling of the net worth gap. At that time, the total share capital of Southwest Securities was 100 million shares, the net assets were only 200 million yuan, and the net assets per share were only 0.125 yuan. Since equity value is the fundamental interest of shareholders, how much can be preserved and how to discount it will cause fierce debate among old shareholders. After arduous negotiations, the major shareholders finally agreed to reduce their shares according to the ratio of 1:0.5. In this way, the original 1.6 billion share capital of Southwest Securities has been reduced to 800 million.
Although the share capital of the old shareholders has shrunk to 800 million, the corresponding net assets are only 200 million yuan. The method we adopted is: the old shareholders raised an additional cash capital of 600 million yuan and injected it into the listed company. In view of the fact that the shareholders could not come up with this cash, Chongqing Yufu, the leading party in the restructuring of Southwest Securities and the major shareholder after the reorganization, provided financing guarantees. At the same time, in order to ensure the safety of state-owned enterprises, a "double insurance" arrangement has been made: first, all the equity of the old shareholders will be entrusted to Chongqing Yufu; Second, the old shareholders will gradually repay the above funds with future dividends until they are paid off, so as to ensure that Chongqing Yufu only plays a trusteeship role, and the final repayer is still the old shareholder.
It is precisely because of our sincerity and because we have completed more than 200 specific matters in 13 major items required by the State Council's instructions that we finally successfully introduced China Jianyin.
China Jianyin and Chongqing Yufu, one is a wholly-owned subsidiary of Central Huijin, and the other is known as "Chongqing's Huijin". The combination of the two strategic investors not only greatly optimizes the equity structure of Southwest Securities, but also greatly enhances the market value of Southwest Securities with the brand effect of the new shareholders.
Third, backdoor listing. Through restructuring, Southwest Securities has been reborn as a high-quality company. So, we started to push for listing.
The listing of Southwest Securities is a complex system project that has encountered many problems. In the restructuring that laid the foundation for Chongqing's early economic development, Southwest Securities was a restructuring with a high degree of complexity and difficulty, and it was impossible to show all the wonderful cases to readers here. What I want to tell is that in this battle, from ordinary employees to group CEOs, from ordinary cadres to the deputy secretary-general of the municipal government who is responsible for overall planning, all relevant departments have taken action to defend the public interest and fight a battle to defend Chongqing's finance.
After the reorganization
On February 26, 2009, Southwest Securities was listed. Judging from the company's 2009 annual report, they handed over a report card that satisfied shareholders of all sizes: the annual cumulative operating income was 2.053 billion yuan, and the total profit was 1.272 billion yuan, a year-on-year increase of 540.92%; The net profit was 1.009 billion yuan, an increase of 608.96%. As of December 3 of that year, the company's total assets were 14.970 billion yuan, net assets were 4.678 billion yuan, net capital was 3.525 billion yuan, earnings per share were 0.54 yuan, net assets per share were 2.46 yuan, and the return on equity was 25.2%.
In the 2011 classification rating of the China Securities Regulatory Commission, Southwest Securities was rated Class A and ranked among the Class A securities firms in history. In terms of traditional business, the restructured Southwest Securities brokerage business has maintained high growth for three consecutive years, ranking first among listed securities firms in terms of share growth and industry ranking improvement; The investment banking business has ranked among the top 10 in the industry for many years, and the M&A business ranked first in the industry in 2011. In 2012, the net assets of Southwest Securities exceeded 10 billion yuan, the total assets exceeded 20 billion yuan, and the capital strength was close to the first camp of brokers, and almost all the licenses required for brokerage operations.
2. Rural credit cooperatives are reorganized into rural commercial banks
On June 27, 2003, the State Council promulgated the Pilot Program for Deepening the Reform of Rural Credit Cooperatives, and selected a number of provinces and cities nationwide to carry out pilot projects. Chongqing is not on this list.
The leading group of the Chongqing Rural Credit Cooperatives could not sit still and reported to me in a hurry. I told them that this was a big opportunity and that they were going to get it. Therefore, on July 11, in the name of the Chongqing Municipal Government, it submitted to the State Council the "Instructions on Listing the Rural Credit Cooperatives of Our City as a National Reform Pilot Unit", and put forward a "three-step" plan, that is, "on the basis of a comprehensive audit in 2002 and a liquidation of assets and capital in 2003, the relevant departments were organized to conduct in-depth research and repeated demonstrations, and put forward the overall plan for the 'three-step' promotion of the city's rural credit cooperatives: the first step is to adopt the method of first piloting and then popularizing the reform of the unified legal person of the county-level cooperative; The county-level associations establish an asset bond relationship, so that the municipal associations participate in the holding of the county associations; The third step is to expand the scale of operation within two or three years, improve the quality of assets, and transform the city's rural credit cooperatives into rural cooperative banks or rural commercial banks." This plan has been approved and approved by the relevant state departments after discussion and research.
At that time, the central government's policy was very clear, the state gave preferential policies, including funds, but it was not the GSP, not everyone's share, and it was not given for free, and it was necessary to "spend money to buy mechanisms". What we want is a mechanism: the state discounts 2.4 billion yuan in bills, and at the same time transfers 2.4 billion yuan of bad debts to the People's Bank of China for safekeeping. If the Chongqing Rural Credit Cooperatives meet the expected targets of the national reform pilot within two years, they can exchange 2.4 billion yuan of notes for 2.4 billion yuan in cash from the People's Bank of China.
So what conditions must be met to get the 2.4 billion yuan? There are two requirements from the state. First, the non-performing loan ratio has been halved from the end of 2002. Second, the capital adequacy ratio should reach 4%. If these two criteria are not met, it can be postponed for a further two years; If the goal is still not achieved, the state will pay back the bad debt. This plan does have a high threshold, but as long as the conditions are met, you can substantially receive a 2.4 billion yuan grant from the People's Bank of China. At that time, I considered that this was not only a tremendous pressure, but also a once-in-a-lifetime opportunity, which we must firmly grasp and force reform.
"Three major surgeries" for more than 700 corporations
In response to the central government's pilot policy, Chongqing spent two years to implement the "three major operations": first, the adjustment of the corporate governance structure, second, the increase of capital and shares, and the replenishment of capital, and third, the disposal of non-performing assets.
First of all, the corporate governance structure and system should be adjusted. At that time, there were more than 760 townships and towns in 39 districts and counties in the city, except for Yuzhong District, of which 729 townships and towns had independent legal person rural credit cooperatives, with a total capital of only more than 200 million yuan - an average of several hundred thousand yuan per rural credit cooperative. The city's rural credit cooperatives have loans of 34.9 billion yuan and non-performing loans of about 15 billion yuan, which are seriously insolvent. Therefore, within one year, we have directly abolished 729 township rural credit cooperatives, established 39 district and county rural credit cooperatives, and 729 township rural credit cooperatives have become branches of district and county rural credit cooperatives. This is a crucial reform of the management system. Secondly, increase capital and shares, and enrich capital. In the past, rural credit cooperatives were cooperative, but now they have been transformed into joint-stock cooperatives. Some enterprises have made equity investments - after increasing capital and expanding shares, 40% of the capital is the original cooperative capital, and 60% is the capital of the joint-stock system. The cooperative system is the original member contribution, and the joint-stock system is the investment of the corporate legal person. After the capital increase and share expansion, the capital of the rural credit cooperatives increased from 200 million yuan to 1.78 billion yuan, a net increase of 8 times. At that time, the state had different capital adequacy requirements for different financial institutions, 8% for commercial banks, 4% for rural cooperative banks, and 2% for rural credit cooperatives – which means that the capital can be magnified by 50 times, for example, with a capital of 1.6 billion yuan, you can borrow 80 billion yuan. According to the calculation of 50 times the capital magnification, the original 200 million yuan capital of the rural credit cooperatives can only borrow 10 billion yuan at most, but the actual loan is more than 30 billion yuan. The risk of this kind of illegal overlending is huge. This capital increase and share expansion not only supplemented the original capital gap of the rural credit cooperatives, but also laid the foundation for the expansion of the scale of loans in the future.
Finally, disposal of non-performing assets. At that time, among the 34.9 billion yuan of loans from rural credit cooperatives, 15 billion yuan had non-performing assets. If the 1.6 billion yuan capital of capital increase and share expansion is used to offset it, no shareholder is willing to invest in shares. Therefore, the only way to resolve the 15 billion yuan of non-performing assets is to find a way. Subdivided, the 15 billion yuan of non-performing assets, "dead debts" have more than 5 billion yuan, mainly in the past 10 years of historical reasons, and most of them are related to the government, if shareholders to "back", investors will withdraw capital, resulting in the instability of rural credit cooperatives. Therefore, it is necessary to formulate a plan for the disposal of non-performing assets of more than 5 billion yuan. There are five general channels.
First, the implementation of the 200 million yuan People's Bank of China special bills can offset about 50% of the bad debt assets.
Second, the Chongqing Municipal Government has given rural credit cooperatives a tax refund subsidy of more than 100 million yuan per year for a certain number of years.
Third, district and county governments are required to bear part of the responsibility. Whether it is due to financial guarantees, direct government borrowings, or bad debts brought about by the merger of the Rural Cooperative Foundation, they are all directly related to the management of the district and county governments, involving a total of 1.2 billion yuan. This cannot be carried by the rural credit cooperatives, but only the district and county governments need to pay back 500 million yuan. This measure has reduced the pressure on the district and county governments to repay their debts and aroused their enthusiasm for supporting the reorganization of rural credit cooperatives.
Fourth, debt collection. If the rural credit cooperatives want to collect debts, they need to use legal and administrative means to crack down on illegal enterprises that evade debts, so the rural credit cooperatives must do everything possible to recover more than 500 million yuan in arrears within two years.
Fifth, profit offsetting. If you use 200 million ~ 300 million yuan of profits to write off bad debts every year, you can write off more than 1 billion yuan in 4 years.
Of the five channels for dealing with non-performing assets, the third is the most difficult to achieve. At that time, it was a federation of 39 districts and counties, and it had to face 39 district and county governments. By November 2005, there was still no movement in many districts and counties, so I convened a special meeting and proposed "land for peace", that is, to use land transfer money to write off the non-performing assets of rural credit cooperatives. The bad debts that the rural credit cooperatives cannot recover in 5~10 years will be difficult to collect if they continue to collect; Even if there is no money, there should be no problem in allocating a piece of land according to the market price of the land.
These "three major surgeries" have seen results that year. In 2003, the rural credit cooperatives took off the hat of loss and used profits to write off more than 200 million yuan of bad debts. In 2005, 39 districts and counties successively completed the two prescribed actions of the state, and the 2.4 billion yuan People's Bank of China bills were basically discounted.
Rural commercial banks with a single legal person shall be established
In 2006, we initiated the second step of reform, reorganizing the Chongqing Rural Credit Cooperative, which had 40 joint-stock cooperative legal persons, into a rural commercial bank with a single joint-stock legal person. The measures taken are still three measures: equity restructuring, capital restructuring, and debt restructuring.
First of all, 40 legal persons, including the municipal rural credit cooperatives and the 39 district and county rural credit cooperatives, were reorganized into one legal person of the municipal rural credit cooperatives, and the rural credit cooperatives in each district and county became branches. It's a complete rebirth. At that time, the Chongqing Rural Credit Cooperatives undertook more than 14,000 employees, and the quality of the personnel was uneven; if they were to adapt to the requirements of modern commercial banks, there was a lot of work to be done in terms of ideological change and business training.
Then, increase capital and shares, and write off bad debts. At this time, the rural credit cooperatives had loans of 70 billion yuan, bad debts of 13 billion yuan, and capital of 1.6 billion yuan. According to the capital adequacy ratio requirement of 2% of rural credit cooperatives, the capital is sufficient; According to the capital adequacy ratio requirement of 8% for commercial banks, 5.6 billion yuan of capital is still needed to balance. According to the calculation that the non-performing assets ratio of commercial banks at that time did not exceed 10%, there could only be 7 billion yuan of bad debts at most. Therefore, we propose to increase the capital by 5 billion yuan as soon as possible by increasing capital and shares, and at the same time write off 7 billion yuan of bad debts. The capital should be increased from 1.6 billion yuan to more than 6 billion yuan, and the issue price per share should be at least 1.6 yuan: The 1.6 billion share capital of the old shareholders will become 1 billion yuan of equity, and the new shareholders will need to pay 8 billion yuan to buy 5 billion yuan of equity; the new shareholders will have to come up with 3 billion yuan to write off the bad debts, and the old shareholders will reduce their shares in the same proportion and take out 600 million yuan to write off the bad debts, so that 50 percent of the 7 billion yuan of bad debts will be written off by the equity premium. At the same time, of the existing 13 billion yuan of bad debts, 1.5 billion yuan, or 11%, should be recovered. The person in charge of the rural credit cooperatives must make a military order: 1.5 billion yuan will be collected by the end of the year. In this way, there is still about 2 billion yuan of bad debts left, and banks can use bad debt reserves to write off 400 million ~ 500 million yuan per year in the next five years. On behalf of the municipal government, Yufu Company first took 2 billion yuan to help the rural credit cooperatives write off the bad debts, and the rural credit cooperatives will take out the bad debt provisions to repay them year by year. In this way, the entire bad debt is still 6 billion yuan, and the loan is 70 billion yuan after all, which meets the regulatory requirements, and after the capital is increased to 6 billion yuan, the loan scale can develop to 100 billion yuan, on the one hand, the bank's efficiency will be improved after the reorganization, on the other hand, the bad debt is diluted, and the non-performing loan ratio will also decline.
I made a detailed report to the principal leaders of the China Banking Regulatory Commission and the People's Bank of China, and they approved it. In their opinion, this is an innovation. Generally speaking, only when you take the money to write off the bad debts first, will the bank's equity have a premium effect; The bad debts have not been dealt with, and according to common sense, they cannot be sold for a single yuan or a share. Now it can be set up like this: when trading equity at 1.6 yuan per share, the bad debts can be written off, and the premium can also be realized at the same time, which is equivalent to reversing the order of things. From the perspective of bank approval, it is generally required that bad debts can be dealt with before strategic investors can be introduced. This time, the China Banking Regulatory Commission (CBRC) specially approved and agreed that Chongqing should raise new shares and set up new companies according to the method of offsetting bad debts with premium income, that is, we were allowed to deal with it in reverse.
Promote the listing of Chongqing Rural Commercial Bank in Hong Kong, China
After two rounds of asset restructuring, Chongqing Rural Credit Cooperatives have developed from a three-level legal person and more than 700 legal person units to a two-level legal person and 40 legal person units, and then developed into a Chongqing Rural Commercial Bank with a single legal person, with its capital increasing from 200 million yuan to 1.6 billion yuan and then to 6 billion yuan, and its bad debts being reduced from 18 billion yuan to 6 billion yuan. On June 29, 2008, Chongqing Rural Commercial Bank Co., Ltd. was established.
Two months later, I went to the rural commercial bank to investigate and told them that the task now is to go public. After careful preparation, in December 2010, Chongqing Rural Commercial Bank was successfully listed on the Hong Kong Stock Exchange, raising US$1.7 billion. This is the first rural commercial bank stock in China. Chongqing Rural Commercial Bank was listed in Hong Kong, creating "four firsts" and was listed as one of the top ten financial news in China in 2010.
After listing, Chongqing Rural Commercial Bank achieved a win-win situation. According to the 2011 annual report, as of the end of 2011, the total assets reached 344.8 billion yuan, an increase of 20.76% over the previous year, and the net profit was 4.248 billion yuan, an increase of 38.77%; the balance of deposits was 246.1 billion yuan, an increase of 19.74%; the balance of loans was 144.3 billion yuan, an increase of 18.17%; The non-performing loan ratio decreased to 1.44%, the provision coverage ratio improved to 265%, and the capital adequacy ratio remained at a high level of 14.9%. The asset scale ranks first in the city, 21st in the country, and 385th in the world. The balance of deposits ranks first in Chongqing's banking industry. The main business indicators are in the forefront of the national counterparts. In 2016, the total assets reached 803.2 billion yuan, a year-on-year increase of 12%; net profit was 8.001 billion yuan, a year-on-year increase of 10.69%; The balance of deposits and loans was 518.186 billion yuan and 300.421 billion yuan respectively, an increase of 10.20% and 11.85%. The non-performing loan ratio further decreased to 0.96%, and the provision coverage ratio reached 428.37%, ranking 170th in the "World Bank 1000 List".
This report card, large and small shareholders should be satisfied, and the local government is also satisfied, because Chongqing Rural Commercial Bank has made great progress in serving the "three rural" areas, and has strongly supported the purpose of the local government's financial services for the real economy.
3. Reorganize Chongqing Commercial Bank
In early 2003, a deputy governor of the People's Bank of China told me: "Chongqing commercial banks should actually be closed, but that will bring the risk of a run and cause social instability, so give you a yellow card warning, it depends on how the Chongqing municipal government can solve this problem." ”
These remarks aroused my attention to Chongqing Commercial Bank. At that time, the situation of Chongqing Commercial Bank was really bad, with total assets of 15 billion yuan, more than 8 billion yuan of loans, including 3.3 billion yuan of non-performing loans, and 600 million yuan of non-credit non-performing assets, and only more than 200 million yuan of capital to support this pile of bad debts. None of the shareholders were willing to make additional investments, and there was no investor who was willing to put up real money. In such a situation, as soon as there is a wind and grass, it will face the risk of run, and the consequences are unimaginable.
Eight comments with "lobster three to eat"
On February 18, 2003, I went to Chongqing Commercial Bank to conduct research, first of all, to encourage the staff. I said: "Chongqing Commercial Bank is to Chongqing what Shanghai Pudong Development Bank is to Shanghai, Shenzhen Development Bank is to Guangdong, and Chongqing, which may become the economic and financial center of the upper reaches of the Yangtze River in 10 or 20 years, it is only right that local governments should have a preference for local joint-stock commercial banks under the premise of equal national treatment." "At the same time, I make the following observations.
The first is to increase capital and shares, not less than 1.5 billion yuan, preferably 2 billion yuan. Considering that almost no enterprises are willing to invest, Chongqing's finance and state-owned enterprises can take the lead, but private capital should account for about 40% of the share. Chongqing's finance will definitely increase its share and operate it through the government's investment and financing platform.
The second is the restructuring of non-performing assets. At present, half of the more than 3 billion yuan of non-performing assets can be resolved through "surgical" restructuring, and half need to be gradually digested in the course of development.
Third, the capital adequacy ratio has reached more than 10%, which is currently only 4%, which is too low and does not meet the 8% rule of the Basel Accord, and Chongqing Commercial Bank wants to become an important bank in Chongqing.
Fourth, the banking service area should not be limited to large cities, but should expand the living space to districts and counties, which is also conducive to the development of small and medium-sized enterprises.
Fifth, priority should be given to the participation of heavy commercial banks in independent projects in the city. In principle, the debt ratio of the investment and financing group established by the municipal government shall not exceed 50%, and there will be no bad debts, which is a "win-win" situation.
Sixth, through the system and mechanism, we should create a team that forges ahead in unity. In terms of operating mechanism, the head office can focus on the big and let go of the small, and the small enterprise loans can be appropriately delegated, and a more flexible mechanism can be established, which is also an important factor for the bank to become bigger and stronger.
Seventh, it is necessary to vigorously mobilize the enthusiasm of financial management talents, and the treatment and contribution should be proportional to the value of the talents themselves, and an effective incentive mechanism should be established.
A month later, at a special meeting of the municipal government, another opinion was added: in the process of restructuring, it is necessary to introduce overseas strategic investors in a timely manner, and complete the preparations for listing in two or three years.
Some of these eight opinions are working methods, some are to boost morale, and some are about the attitude of the government. Among them, the capital increase and share expansion, debt restructuring, and the introduction of strategic investors through equity restructuring to achieve the overall listing constituted the so-called "lobster three eats" that were later restructured by Chongqing Commercial Bank.
Two big steps in a year
There are two main problems of heavy commercial banks: one is insufficient capital, and the other is too many non-performing assets. In 2004, the heavy commercial bank took two big steps.
The first is to increase capital and shares. State-owned enterprises took the lead in taking shares, and private enterprises also actively followed up, expanding the capital from more than 200 million yuan to 1.6 billion yuan in three months.
The second is the disposal of non-performing loans. In 2004, with the help of Yufu Company, we acquired the most important non-performing assets of 1.25 billion yuan of heavy commercial banks. In order to balance the 1.25 billion yuan of non-performing assets, the municipal government has set a policy: based on the tax revenue in 2003, the incremental tax revenue after the development of heavy commercial banks will be repaid, and the time will be from 2004 to 2009. According to calculations, according to the calculation of the annual new tax revenue of 300 million yuan of heavy commercial banks, the cumulative new tax revenue in five years is 1.5 billion yuan, which can completely balance the principal and interest of 1.25 billion yuan advanced by Yufu Company.
Through the "two moves" of capital increase and share expansion and debt stripping, we have completed the "homework" assigned by the regulatory authorities. Since at least a few hundred million yuan of the remaining debt of more than 2 billion yuan can be recovered, the heavy commercial bank has been out of the high-risk area.
At that time, this was considered the best way for commercial banks to restructure their debts, and the China Banking Regulatory Commission and the People's Bank of China praised it and proposed that urban commercial banks across the country could restructure themselves in accordance with the restructuring methods of heavy commercial banks if they had such problems. Subsequently, some commercial banks in other regions used almost the same methods as we did when they restructured.
Introduce strategic investors at a premium
In November 2005, the restructuring plan of the heavy commercial bank with the goal of listing was approved at the special meeting of the municipal government, which was a more thorough plan of "capital increase and share expansion + debt restructuring". According to this plan, Yufu Company will undertake 2.1 billion yuan of non-performing loans of heavy commercial banks, with a cumulative total of 3.35 billion yuan. How to balance the 2.1 billion yuan?
The first is to transfer the equity premium of 400 million shares of the heavy commercial bank to strategic investors, and the premium will be partially digested; Second, the government allocated 5,000 acres of reserve land to Yufu Company between the first and second rings of the main city, and the land transfer fee was balanced. The logic of this is that the heavy commercial bank was transformed from an urban credit cooperative, and most of its bad debts during the credit union period were caused by policy factors.
After two rounds of non-performing asset restructuring, the heavy commercial banks that have been constantly traveling lightly have been rapidly improving in terms of credit scale and efficiency, and the non-performing loan ratio has dropped to 0.34%, becoming a high-quality bank.
With banks with high-quality assets and well-known international investment banks, it seems that the introduction of strategic investors is a matter of course. After in-depth negotiations, Hong Kong's Dah Sing Bank stayed, and later bought 340 million shares from Yufu at a price of 2.02 yuan per share. This was the highest price for a commercial bank to introduce a strategic investor to transfer shares at that time, and it was generally more than 1 yuan per share.
Listed on the Hong Kong Stock Exchange
After three rounds of restructuring, Chongqing Commercial Bank was renamed Bank of Chongqing and became an influential bank in China and even in the world. According to the ranking of the "World Bank 1000 List" published by the British "Banker" magazine in September 2010, Bank of Chongqing ranked 690th overall, ranked 276th in return on assets and 56th in return on capital.
On November 6, 2013, Bank of Chongqing was listed on the Hong Kong Stock Exchange, becoming the first Chinese-funded bank listed in Hong Kong in three years and the first listed city commercial bank in southwest China, which was oversubscribed by 7.81 times and favored by investors from all walks of life.
Restructuring experience of financial institutions
In addition to the three cases of restructuring Southwest Securities, Chongqing Rural Commercial Bank and Bank of Chongqing, the restructuring process of Chongqing Trust and Chongqing Three Gorges Bank is also similar.
The restructuring of these five financial institutions all involves the debt restructuring of non-performing assets, the restructuring of assets with capital injection, and the equity restructuring of corporate governance structure, which will inevitably bring about the restructuring of the management structure, and the goal is to standardize the listing.
In the process of rebirth of five local financial institutions in Chongqing that were on the verge of bankruptcy and were reborn through reorganization, we have summed up a painful lesson: the level of internal governance of financial institutions, especially private financial institutions, is directly related to the achievements of private banks. Whether from the perspective of international experience or the lessons learned by these five financial institutions, the key is to prevent three situations.
The first is to prevent excessive concentration of equity. At present, although the proportion of shares held by a single shareholder of a private bank cannot be higher than 30%, it is still prone to the situation of "one share dominating", making private banks become the "cash machine" of family enterprises.
The second is to prevent affiliated enterprises from transferring benefits through loans.
The third is to prevent the phenomenon of insider control by professional managers. If the equity is too dispersed, and the equity of the major shareholder is less than 5%, it is easy to cause the hollowing out of shareholders' power and the formalization of the decision-making of the board of directors, which is not only easy to be hostilely acquired, but also may form the actual control of the managerial insiders.
In the process of reorganizing the five financial institutions, the Chongqing Municipal Government attaches great importance to and gives full play to the basic and professional functions of intermediary institutions such as securities companies, accounting firms, and law firms, and at the same time, Chongqing's state-owned assets system has played a unique and effective function. In 2003, when the Chongqing SASAC was established, all the local financial capital and industrial and commercial capital of Chongqing were transferred to the SASAC for integrated management. If the State-owned Assets Supervision and Administration Commission of Chongqing Municipality only manages the assets of industrial and commercial enterprises, the assets of financial enterprises are managed by other administrative departments, and the management system of financial capital and industrial and commercial capital is separated, then the asset restructuring of local financial institutions in Chongqing will not be so smooth and effective. In this sense, it is of great significance for the Chongqing SASAC to explore the system of integration of asset management and human management of local financial institutions and industrial and commercial enterprises. In the process of work, in the development of enterprises and local communities, we will always encounter all kinds of difficulties, bottlenecks and even crises, if we can use the reorganization of the thinking method, to turn the evil into good and get rid of the predicament, it is undoubtedly a great blessing.
New book information
"Restructuring and Breakthrough" Author: Huang Qifan Publication date: April 2024
Publisher: CITIC Publishing Group
In the process of work, in the development of enterprises and local communities, we will always encounter all kinds of difficulties, bottlenecks and even crises, if we can use the reorganization of the thinking method, to turn the evil into good and get rid of the predicament, it is undoubtedly a great blessing.
In the course of more than 50 years of work, Huang Qifan, the former mayor of Chongqing, participated in and led a series of restructurings, from which he deeply understood the true meaning and fun of reorganization: its true meaning lies in the optimal allocation of resources, system and mechanism innovation, and its fun lies in "doing whatever you want without exceeding the rules" and "another village". This book is a compilation of Huang Qifan's thinking and practice of "restructuring for breakthroughs" when he encountered difficulties during his work in Chongqing, in order to share with readers the insights of reorganization.
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