"The long river of time has finally reached a big turning point. At the end of industrialization, the turning point of the big investment cycle, the credit tide is fading, the financial overcapacity is overcapacitated, the weeds are spreading at the asset end, and where is the debt at the village. The era when the bank supervisor's dad turned into a wolf dad, the masked party of bank cosplay, big investment bank and pan-asset management is over. Penetrating to the end, China's current finance is finance, and China's finance is debt, and the other end of debt is real estate. Interest rate Marketization carries an unbearable weight and a shackle that is difficult to advance and retreat."
——"Winter is here, how many bankers are still pretending to be banks"
Weeds are spreading on the asset side, but where is the village on the debt side?
Author: Zhao Jian@Nishizawa Research Institute
Compilation: Wei Ran@8 Decimal
1. Economic democratization under the market constitution
In 1989, when the Berlin Wall fell, a scholar named Francis Fukuyama excitedly wrote a book called "The End of History and the Last Man", praising the victory of the democratic system loudly. China's interest rate liberalization has gone through a long process of nearly two decades, and the ruins of interest rate spread control are waiting for the final kick. Although the underlying assets of interest rate marketization-financial property rights are still not clear enough, we also have reasons to make a record of the end and beginning of an era. The last man is also the first man.
Only by understanding Chinese banks, their behavioral logic and balance sheets can we have a deep understanding of China's macroeconomy. If you walk around the bank at the beginning of last year, you will find that strict supervision will definitely lead to a Minsky moment——
Commercial banks have done too much work of policy banks,
Policy banks have done too much work for commercial banks,
The central bank has done too much work as a policy bank,
This is where the fundamental problem lies.
In the past, commercial banks serving large enterprises and large finances have turned into a large bureaucratic and authoritarian organization. Because the degree of marketization is insufficient, the operating pressure is not great, especially the head office has many departments, bureaucracy, and large enterprise diseases are rampant, even worse than traditional state-owned enterprises.
As for the front-line personnel who directly face the client, they are burdened with a mountain of indicators, always thinking about how to complete the indicators within the assessment date, and how can they have time to consider maintaining customer relationships that require long-term effort and do not quickly bring assessment results.
This creates a contradiction between the old production relations of commercial banks and the new productivity under the information technology revolution. This contradiction can be regarded as the main contradiction facing the current banking industry.
The greatness of the information technology revolution is that it has promoted market deepening at the economic level, or economic democratization under the constitution of the market.
There are comments and votes for e-commerce shopping and restaurant consumption. Those with low votes will be rejected by consumers. It is difficult for suppliers to follow the "one-shot deal" model of rogues in the past.
The same goes for financial services. Physical outlets have moved to decentralized smartphones one by one. Every mobile phone is an outlet, a counter, and a teller served by artificial intelligence.
Source: Tencent Financial Layout
The development of mobile Internet and artificial intelligence has made it very easy to move deposits between banks. Now mobile phones basically have WeChat, Alipay, plus two or three banking apps. A mobile phone is also a financial supermarket. Whichever wealth management company has a high rate of return, and the term setting is convenient, and the deposit can be moved with the touch of a finger.
And what about corporate clients? Large corporate groups almost all have their own financial companies and financial holding companies. Capital-intensive enterprises simply set up their own banks, and their deposits have long been turned into interbank investments. As for small businesses, they are short of funds, so they still deposit money in the bank?
In the future, banking is no longer just a licensed business. From the nerve center to the business backstage to the contact point that directly interacts with customers, it will be deeply transformed by financial technology. , Smart KYC replacement.
Source: Yiou intelligence
2. Informal institutional changes and three obstinate complexes
Institutional economics believes that the difficulty of institutional change lies not in formal institutions such as mechanisms, laws, and policies that can be copied, but in informal institutions such as social culture, ideology, and customs. Therefore, North, in his classic book "Understanding the Process of Economic Change", described knowledge, beliefs, and mental structures in great detail, and the sticky obstacles to institutional changes or reforms.
It is easy to get rid of the thieves in the mountains, but it is difficult to get rid of the thieves in the heart; it is easy to get rid of the shackles of interest rate control, but it is difficult to get rid of the knots of bankers. The ideological awareness of bankers and regulators determines the pace of interest rate marketization between advance and retreat, but there are three deep-rooted complexes that have been lingering in the minds of Chinese bankers.
One is the scale complex, "big" but not down
Chinese bankers are obsessed with size because of small-scale discrimination in banking. In terms of regulation, many business qualifications and licenses require scale restrictions; in terms of market, scale is an important consideration for brand and credit; in terms of finance, China's tax system also makes the government willing to see banks expand significantly.
Source: Financial Industry Network
However, in the face of economic downturn, rising risks and production capacity reduction cycle, it is still ambitious to promote large-scale expansion, which is a bit tragic. The final result is that the non-performing ratio has risen and the quality of assets has declined, and the lack of endogenous funding sources can only rely on the creation of financial self-credit, that is, the disorderly expansion of interbank business. At the same time, due to ignoring the laws of the market and giving the front-line business personnel too high assessment indicators, the front-line personnel had to violate regulations and make frauds to do a lot of bad business that violated the requirements of risk management.
The rampant scale complex, especially when scale cannot create profits, violates the original intention of market-oriented constraints. Because shareholders are pursuing return on net assets, managers under the control of insiders will pursue ineffective scale. Such a strong scale complex just shows that the corporate governance of commercial banks has serious problems such as lack of shareholder rights and insider control. The great leap forward of the balance sheet has led to the hidden danger of systemic risk.
The second is the bottom line complex, rigid payment
The bank's bottom line complex has derived the rigid payment complex of the entire financial system. This comes from subconscious inertial thinking, big and small should not fail, and even banks should not fail. When risks are everywhere, the party and the country will always lend a hand to rescue, otherwise it will endanger social stability. The central government is the lender of last resort, and the government is the ultimate risk bearer.
This kind of cognition has formed the unique split mental structure of Chinese bankers: on the one hand, they strive to follow commercial and market-oriented thinking, and use scale as the core to expand their assets and liabilities to seize market share and industry rankings; There is no sense of independence and independence, and the bottom line and gangdui have become unwavering beliefs deep in my heart.
China's marketization is not advancing in parallel. To be precise, the marketization of commodities is earlier than the factor market and financial market. The reform of financial institutions has lagged behind other reforms by more than ten years. It was not until the end of the 1980s that the banking system changed from appropriation to loans, and banks began to operate commercially; at the beginning of this century, commercial banks began to reform their shareholding systems and gradually improved corporate governance. Therefore, commercial banks have very strong financial genes.
And most importantly, almost all domestic commercial banks are controlled by the government. Not only from the perspective of shareholder structure, the fact that the party committee is placed before the board of directors shows that the bank and the government are not completely separated. As long as the exchange rate exists, the risk cannot be accurately priced, and the interest rate, as the price of funds, cannot play an effective role in allocating resources in the money and credit markets.
The third is benchmark complex, interest rate control
It stands to reason that after the liberalization of interest rates is completed, there should be only one benchmark interest rate left, which is a yield curve formed in the open market and transmitted to various markets—such as the Federal Reserve’s federal benchmark. Yangma’s current idea is to stabilize market fluctuations through the interest rate corridor (the top is the SLF interest rate, and the bottom is the deposit reserve interest rate), and then form a market-recognized benchmark in the corridor.
In the era of interest rate spread control in China, there has been a long-term regulatory deposit and loan interest rate benchmark. The purpose of artificially establishing this benchmark is not only to maintain interest rate differentials to maintain the value of bank franchises to prevent systemic risks caused by irrational price wars, but also to redistribute credit resources in a disguised form to undertake fiscal functions. The liberalization of interest rates is a gradual process. The liberalization of interest rates is not the cancellation of interest rate benchmarks, but the continuous expansion of floating space. In this way, in terms of pricing habits, credit contracts are still formulated according to the benchmark + floating space, and these "benchmark ghosts" have been floating in the credit and quasi-credit contracts of more than one trillion yuan.
The long-term existence of deposit and loan benchmarks in reality has gradually solidified into a complex in the minds of bankers, which has become a soft culture that seriously hinders the marketization of interest rates.
3. The Agency Problem, Debt Constraint Failure, and the Tragedy of the Commons
The formation of ideology needs to be traced back to the source. The basic rule of the market economy game is the "Coase Theorem", which extends to the meaning that only when property rights are clear and rights and responsibilities are clear can transactions be efficient.
China's reform and opening up is a process of continuous clarification of property rights. A household contract responsibility system has saved hundreds of millions of farmers. The transition from state-owned to collectively owned by villages and towns is also a major improvement in the clarity of property rights. China's market-oriented reforms are not advancing in parallel. The process of commodity marketization is relatively rapid and thorough, and the property rights of commodities are relatively clear. However, in the field of property rights of financial assets, it has always been a mess.
As a part of financial marketization, interest rate liberalization requires the further improvement of the infrastructure of the financial system—the clear definition of property rights of financial assets—rather than simply deregulating interest rate controls.
A series of problems in the current Chinese financial system, including the Great Leap Forward of the balance sheet, the viral growth of shadow banks, and the spread of financial corruption, etc., are rooted in the unclear property rights of financial assets. The crux of this ambiguity is also very simple, that is, it violates the basic accounting principle: through to the end, the creditor and the debtor are the same person. What is even more heart-wrenching is that this so-called "person" is also a false concept - the country or its proxy government. Everyone knows that the larger the organization, the longer the agency chain, and the higher the cost of collective action, until it is completely impossible to be represented.
According to economic principles, debt restraint is to improve the efficiency of economic operations and allocate resources to the most effective areas; while invalid debtors or project subjects will go bankrupt and liquidate because they cannot pay off their debts, and ultimately exclude inefficient subjects from the economy. Out of the system, the advantage of the fittest will be eliminated.
However, if the debt and the creditor's right belong to the same subject, it is nothing more than from the "left pocket" to the "right pocket", then the debt constraint is basically useless, and it is just a matter of accounting entries.
From a bird's-eye view of China's national balance sheet, the financial sector is mainly composed of commercial banks (creditors), and the main body of its asset allocation portfolio "credit + non-standard + bonds" is mainly state-owned enterprises and government financing platforms (debtors). Real estate loans for land finance. The debtors of these assets are basically the general fiscal sector.
For the major shareholders who have control over the creditors and debtors, the penetration is the same agent in the end-the state-owned assets and financial departments. Some other small shareholders are nothing more than some private enterprises and foreign capital who follow the "soup" as financial investors.
The accounting problems in China's financial system have greatly hindered the performance of the debt settlement mechanism, and the ineffective debt constraints have exacerbated the disorderly abuse of credit and the brutal expansion of financial scale. "Anyway, the party and the state will have the bottom line in the end" has almost become the catchphrase of some financial people. A considerable number of county-level cities, relying on this delicate debt accounting relationship to issue excessive debts (local banks and local platforms belong to the same "father" management), will almost exhaust their credit in the next ten years.
If the financial property rights are clear, private financial companies will never take over such debts. However, public financial property rights are different. The so-called tragedy of the commons, the overdraft and abuse of public credit among individuals, is causing increasingly serious desertification of the financial ecology.
4. Financial Revolution and Ideological Enlightenment
We often evaluate a certain problem as "system problem" or "system problem". But where is the root of the system? In fact, the ideology of each individual (whether it is the so-called top designer or the participating executor) has a fundamental impact on the transformation of the entire institutional structure.
The ultimate of institutional change is the change of cognition, consciousness and belief. The marketization of interest rates should not only be the marketization of currency prices, but a series of profound changes in the rules of the game. If most of the bank's deposits come from state-owned enterprises or government platforms, then special relationship resources become key. After all, the level of deposit interest rates is only related to state-owned units with unknown ownership, and has little to do with individuals. As long as the relationship is in place, it is up to the people's "agent's agent (chairman or chief financial officer)" to decide who to give the low-interest deposits to. Decide.
However, the old model of "pull deposits" of this relationship system is coming to an end. Because after the interest rate is liberalized, the deposit that artificially lowers the interest rate is equivalent to sending you the interest rate difference will no longer exist. Deposits don't have to be instant, only the interest rate difference can be instant. The essence of spread formation is professional service to customers. When deposits are no longer valuable, what is valuable is professional talents and a management mechanism that meets market requirements.
China's financial system is facing a subversive "ideological enlightenment" or "financial revolution". In theory, it is an institutional change of the financial industry system, from a regulated economy to a market economy.
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References:
References:
Bank Trilogy (Nishizawa Research Institute: ID: wendao-thinkers)
Winter is here, how many bankers are still pretending to be banks
Liberalization of Interest Rates——The End of History and the "Last" Banker
