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Part 1: Model Articles on Policy Risks of Financial Institutions
Key words: new countryside financial institution Risk Cause Analysis
CLC No.: F830.91 Document identification code: A
1 Development status of new rural financial institutions
First of all, the number of new rural financial institutions has developed rapidly, and rural banks can absorb deposits, making the development fastest, accounting for an important proportion in new rural financial institutions. Rural mutual fund cooperative is the second among the three institutions. The development of loan companies is the slowest, accounting for half of the number of rural mutual fund cooperatives, and even less than that of rural banks. Secondly, the establishment of new rural financial institutions, such as village banks, loan companies, rural mutual funds cooperatives, is an innovative move to solve the shortage of rural financial supply and improve rural financial services. First, it has better met the financial needs of local farmers and rural SMEs. Second, it has improved the coverage of rural financial institutions' outlets. Third, it has played a very important role in activating the rural financial market, improving the rural financial system and improving rural financial services.
New rural financial institutions are a new thing. Due to their short establishment time, there are still many problems and difficulties in the initial stage of development, especially because they are not aware of risks, or because they are difficult to survive, or because their business objectives are set too high, or because they are chasing high profits, and other reasons, there have been problems of imprudence and non-compliance, with great potential risks.
2 Risks faced by the development of new rural financial institutions
2.1 In macroeconomic fluctuations policy risk
(1) Risks brought by fluctuations in economic and industrial policies. The new urbanization under the top-level design cannot be separated from the new rural financial institutions rooted in the countryside, but in the financial support, the institutions have no clear preferential loan policies. Moreover, the new rural financial institutions have not established a package of credit product system, and the varieties are relatively simple. At the same time, urbanization and rural new community construction have large loan lines, long cycle, slow recovery, lack of effective asset protection, and large credit risks.
(2) Risks brought by interest rate marketization. After the interest rate liberalization, the deposit cost of new rural financial institutions was increased after the upper limit of deposit interest rate was liberalized, and the lower limit of loan interest rate was liberalized, which reduced the loan interest income of new rural financial institutions, and ultimately led to the reduction of the net interest margin income of deposits and loans of new rural financial institutions. New rural financial institutions have weak ability to price deposits and loans, so when pricing deposits and loans, they need to take credit risks, capital supply and demand, costs and other factors into consideration, which will make them face great risk challenges.
(3) Risks brought by lower access threshold. A lower threshold of access will attract many investors and speculators, as well as people engaged in private lending and loan sharking. There is a gap between the main scope of services of new rural financial institutions and the main concentration areas of grass-roots CBRC institutions, so the difficulties in carrying out on-site supervision and field investigation bring about the risk of inadequate supervision. The number of new rural financial institutions is complex, and the supervision ability of grass-roots supervision offices with or without them is at risk.
2.2 Internal risks in the sustainable development of micro institutions
(1) Liquidity risk. Due to the lack of self publicity of new rural financial institutions and the participation of private capital, some urban and rural residents think that the rural banks are "private banks", or confuse them with small loan companies and financing guarantee companies, and think that it is risky to store money in rural banks, which makes it difficult for rural banks to absorb funds. Rural banks, which account for the largest proportion of new rural financial institutions, generally have less registered capital, small business scale, low recognition of local governments for rural banks, and insufficient support for rural banks.
(2) Operational risk. New rural financial institutions mostly follow the original systems, which will inevitably lead to inapplicability of the system and imperfect mechanism. In addition, due to the restrictions of various conditions in rural areas, the staff quality is low and they cannot receive systematic training, which is easy to form the risk of improper operation. At the same time, most of the new rural financial institutions have weak IT software and hardware facilities, insufficient data security management capabilities, and their business systems are mostly "downsized" or "eliminated" systems, which affect the security and integrity of data.
(3) Linked risk. Due to the imperfection of the internal organization and internal system of the new rural financial institutions, it may lead to the fact that the managers or major shareholders have the final say, turning the newly established new rural financial institutions into personal coffers and forming the situation of insider control.
(4) Industry concentration risk. Because the new rural financial institutions have few business outlets, small service coverage areas, and business operations are within the limited areas of their registered locations, this has resulted in a high concentration of the new rural financial institutions' loan industry. When the economy is going down or the industry risks are gathering, it is difficult for loan customers to transfer their business risks. For example, by the end of 2012, 8 rural banks in Inner Mongolia had exceeded the single customer loan concentration index, accounting for 14.5%.
3 Analysis of the Risk Causes of New Rural Financial Institutions
3.1 From the perspective of farmers and small and micro enterprises
Insufficient sense of identity. Due to the insufficient publicity of new rural financial institutions or the slow circulation of rural information, farmers and small and micro enterprises failed to have a good understanding of the institutional nature, service objects, market position, etc. of new rural financial institutions. Farmers lack a rational understanding of the new rural financial institutions. Compared with other financing means, the new rural financial institutions have complex loan procedures and lack a systematic and complete farmer credit evaluation system, which makes farmers prefer to borrow from relatives and friends.
3.2 From the perspective of new rural financial institutions
(1) Profitability leads to inaccurate positioning. The important energy supply of the new rural financial institutions is to "build canals to divert water", and introduce surplus funds from other regions to support the development of "agriculture, rural areas and farmers". However, when its own economic benefits are not good and the price of funds changes significantly, it is possible to continue the original governance defects, or even become a new "pump", transferring rural capital to cities, worsening the development of rural finance, and also worsening the sustainable development of new rural financial institutions.
(2) Inadequate self capacity. Restricted by market positioning, equity structure, local economic development level and low awareness of the public on new rural financial institutions, the growth of deposits is objectively restricted. Due to its late start and backward business service means, it has restricted its ability to explore the market and the development of asset business, which will also bring many risks in sustainable development.
3.3 From the perspective of government and relevant departments
(1) Asymmetric information and untimely supervision. Because the information transparency of enterprise and personal funds is not high, there will be information asymmetry in equity setting, which will lead to equity related relationships, and then may form related transactions. Most of the new rural financial institutions are located in counties (banners), while most of the bank offices have been merged or merged. The development of the new rural financial institutions does not match the supervision force, resulting in an obvious shortage of territorial supervision force.
(2) Inadequate support policies. The rural banks in the new rural financial institutions not only failed to enjoy the same preferential policies as other agricultural financial institutions in terms of tax, but also had heavy tax burden in some regions. In some places, there are discriminatory policies, making it difficult for new rural financial institutions such as village banks to absorb deposits from financial and public institutions.
reference
[1] Li Fu'an Sustainable development of rural banks focuses on system construction [N]. Economic Daily, December 9, 2013
[2] Lu Zhiqiang, Xiong Deping, Li Hongyu New Rural Financial Institutions: Governance Difficulties and Solutions [J]. Agricultural Economic Problems, 2011, 32 (8)
[3] Qu Xiaogang, Luo Jianchao The Impact of Interest Rate Marketization on New Rural Financial Institutions [J]. Hulunbeier Journal, 2013 (4)
[4] Ji Ruipu Hidden dangers brought by lowering the threshold of new rural financial institutions [J]. Red Flag Paper, 2008 (2)
[5] Xiong Deping Rural Finance and Rural Financial Development: Conceptual Reconstruction Based on Transaction Vision [J]. Financial Theory and Practice, 2007 (2)
Part 2: Model Articles on Policy Risks of Financial Institutions
In order to coordinate with the smooth implementation of the national energy conservation and emission reduction strategy, urge banking financial institutions to closely combine the adjustment and optimization of credit structure with the adjustment of the national economic structure, and effectively prevent credit risks, the CBRC has formulated the Guidelines on Energy Conservation and Emission Reduction Credit Work. The Opinions are hereby printed and distributed to you. Please implement them carefully.
All banking regulatory bureaus shall forward this Circular to all banking financial institutions within their jurisdiction and urge them to implement it.
Guiding Opinions on Energy Saving and Emission Reduction Credit
Chapter I General Requirements
Article 1 Banking financial institutions should conscientiously implement the spirit of the Notice of the State Council on Printing and Distributing the Comprehensive Work Plan for Energy Conservation and Emission Reduction (GF [2007] No. 15) and the Decision of the State Council on Implementing the Scientific Outlook on Development and Strengthening Environmental Protection (GF [2005] No. 39), from implementing the scientific outlook on development to promoting the comprehensive and sustainable development of the economic, social and environmental From the strategic perspective of ensuring the safe and stable operation of the banking industry, fully understand the significance of energy conservation and emission reduction, and earnestly do a good job in credit granting related to energy conservation and emission reduction.
Article 2 Banking financial institutions should take the promotion of energy conservation and emission reduction in the whole society as their important mission and the concrete embodiment of fulfilling their social responsibilities, strengthen their staff's awareness of energy conservation and emission reduction, fully grasp the policies, regulations and standards of energy conservation and emission reduction, and vigorously enhance the scientificity and predictability of credit granting.
Article 3 Banking financial institutions should start with strategic planning, internal control, risk management and business development, prevent various risks caused by high energy consumption and high pollution, and strengthen system building and execution capacity building.
（1） According to the business characteristics, risk characteristics and organizational structure of the institution, work plans are formulated to deal with various risks caused by high energy consumption and high pollution.
（2） According to the main industries and characteristics of the clients of the institution, the credit policy and operating rules for high energy consumption and high pollution industries are formulated.
（3） Formulate credit procedures and specifications for energy conservation and emission reduction according to the needs of internal control and risk management of the institution.
（4） According to the professional ability and experience of the credit approval personnel, the approval authority for enterprise and project credit related to energy consumption and pollution risks should be appropriately concentrated.
（5） The Board of Directors shall review and approve relevant plans, policies, procedures and specifications, arrange appropriate resources, and designate senior managers who are familiar with high energy consumption and high pollution risks to be responsible for the implementation and implementation of relevant systems.
Chapter II Credit Policy
Article 4 Banking financial institutions shall, in accordance with the national industrial policies, not provide credit support for new projects that are listed as restricted or eliminated by the national industrial policies; If the existing production capacity belongs to the restricted category and the state allows the enterprise to take measures to upgrade within a certain period of time, the credit support can be continued according to the credit principle; For obsolete projects, in principle, various forms of new credit support should be stopped, and measures should be taken to recover the granted credit. Banking financial institutions shall not bypass the procedures of project credit granting and provide financing and guarantee for construction projects by working capital loans, acceptance bills or other various off balance sheet ways.
Article 5 Banking financial institutions shall pay close attention to the achievement of energy conservation and emission reduction goals and environmental compliance of credit enterprises, strengthen communication with the competent departments of energy conservation and emission reduction, and shall not add new credits to credit enterprises that have announced and identified prominent energy consumption and pollution problems and have failed to make rectification, except for credits related to improving energy conservation and emission reduction, The original credit should be gradually reduced and recovered.
Article 6 Banking financial institutions should strengthen the analysis of backward production capacity of key industries, and take reasonable and effective measures to adjust, compress and withdraw credit related to backward production capacity in a timely manner for enterprises and project loans that have been included in the list of backward production capacity by the National and Provincial Development and Reform Commission or other relevant departments.
Article 7 Banking financial institutions shall timely track the key energy conservation projects, renewable energy projects, water pollution control projects, sulfur dioxide treatment, pilot projects of circular economy, water resource conservation and utilization, comprehensive utilization of resources, waste recycling, clean production, research and development of energy conservation and emission reduction technologies, industrialization demonstration and promotion, energy conservation technology service system For key projects such as environmental protection industry, credit risk assessment, cost compensation mechanism, government support policies and other factors shall be comprehensively considered to meet their credit needs in a focused manner, and corresponding financial services such as investment consultation, capital clearing and cash management shall be provided.
Article 8 Under the same conditions, banking financial institutions can give priority to credit support to enterprises and projects that have received national and local fiscal and tax policy support, and to enterprises and projects that have achieved remarkable results in energy conservation and emission reduction and have been commended, recommended and encouraged by national competent departments.
Article 9 Banking financial institutions shall implement different regional credit policies, and give priority to credit support to enterprises and projects in regions with significant energy conservation and emission reduction under the same conditions, with reference to the completion of energy conservation and emission reduction indicators of provinces, autonomous regions, and municipalities directly under the Central Government announced by relevant national departments; For areas listed in the "regional approval limit" or "river basin approval limit" list by the national environmental protection department, credit should be strictly controlled.
Article 10 Banking financial institutions should make full use of the business development opportunities brought by the implementation of the national energy conservation and emission reduction strategy, strengthen financial innovation, and actively develop innovative financial products related to energy conservation and emission reduction.
Chapter III Credit Management
Article 11 Banking financial institutions shall, in the principle of "knowing your customers" and "knowing your customers' business", thoroughly understand the completion of energy conservation and emission reduction goals and environmental compliance of credit enterprises and projects through on-site investigation, consultation with competent departments of energy conservation and emission reduction, industry associations, credit investigation departments and other appropriate ways, Carefully analyze the energy consumption and pollution problems that may exist in credit enterprises and projects, as well as various risks that may arise.
Article 12 Banking financial institutions shall conduct strict compliance review on the "six necessary conditions" for the commencement of project construction (which must comply with industrial policies and market access standards, project approval or filing procedures, land use preliminary review, environmental impact assessment approval, energy conservation assessment review, credit, safety and urban planning regulations and requirements), The minimum requirement for project credit compliance review is that the project is approved by the relevant competent department. When conducting compliance review, banking institutions should not only pay attention to formal compliance requirements, such as the authority and integrity of relevant approval (or approval, filing) documents and the legitimacy of relevant procedures, but also pay attention to substantive compliance requirements, including that new projects should comply with national industrial policies and development trends, and project environmental assessment should be compatible with the general requirements of planning environmental assessment, In principle, the technical and economic standards should be in line with the domestic advanced level and the international level.
Article 13 Banking financial institutions shall strengthen the management of the allocation of project construction credit funds. If a construction project should be approved but has not been approved by EIA, the banking financial institution shall not allocate funds in advance for preparation and construction before commencement; If the design, construction and operation of the environmental protection facilities of the project are different from the main project, the banking financial institution shall suspend the fund allocation for the construction of the main project until the "three simultaneities" are achieved; Banking financial institutions shall not allocate project operating funds if the environmental impact assessment approval for project completion is not obtained but should be obtained after project completion; For projects invested and constructed overseas by domestic enterprises, banking financial institutions should urge the construction enterprises to comply with the environmental protection and relevant legal requirements of the country or region where the project is located, and follow the international good practices in assessing and controlling the environmental and social risks of international financing projects.
Article 14 Financial institutions in the banking industry should strengthen the classified management of project credit, and banks with conditions can divide the loan projects into three categories according to their impact on the environment:
Class A: projects that seriously change the original state of the environment and the adverse environmental and social consequences are not easy to eliminate;
Category B: projects that have adverse environmental and social consequences but are easy to be eliminated through mitigation measures;
Class C: projects that will not produce obvious adverse environmental and social consequences.
Banking financial institutions shall conduct classified management on the above different types of project credit. For projects classified as Class A and Class B with greater risks, banking financial institutions should require the construction unit and even important third parties such as contractors, suppliers, supervisors, etc. to establish and implement management systems and action plans for environmental impacts, communication systems with local communities and the public, and monitoring, assessment and reporting (announcement) systems, At the same time, the mechanism, capability and results of its environmental risk control are monitored and evaluated by an independent third party. Banking financial institutions should pay appropriate attention to the environmental risk control of the construction unit for projects with less risk in Category B and projects classified as Category C.
Article 15 Banking financial institutions shall implement list management for credit granting enterprises with major energy consumption and pollution risks. The credit enterprises on the list include those listed as key monitored by the national and local competent departments of energy conservation and emission reduction, and other credit enterprises with major energy consumption and pollution risks independently recognized by the banking financial institutions. Banking financial institutions should take the initiative to communicate with the competent department of energy conservation and emission reduction, timely understand the completion of energy conservation and emission reduction goals and environmental compliance of the above enterprises, constantly update the list of enterprises, and strengthen credit management for the listed credit enterprises.
Article 16 Banking financial institutions should seek various ways to mitigate the compliance and credit risks related to energy consumption and pollution, and may require the construction unit to increase the proportion of capital, issue medium and long-term corporate bonds (corporate bonds), increase energy saving and consumption reducing technological transformation projects and investment reform plans, and take the management right and cash flow after the completion of the beneficial project as the pledge of credit, The construction unit can also be required to purchase construction period insurance for the project, including engineering liability insurance, environmental liability insurance, product liability insurance, etc. related to energy consumption and pollution risks. For credit enterprises and projects with significant risks, management can be strengthened through syndicated loans to spread risks.
Article 17 When pricing the risk of credit products, banking financial institutions shall take full account of the credit risks related to energy consumption and pollution of credit enterprises and projects, and reasonably determine the pricing of credit for energy conservation and emission reduction in accordance with the principle of matching risks with benefits. When determining the risk adjusted income indicators and allocating economic capital, full consideration should be given to various risk impacts that may be caused by enterprises and projects in industries with high energy consumption and high pollution.
Article 18 Banking financial institutions should pay close attention to the impact of the national adjustment of industrial structure and closure of backward production capacity on the repayment ability of credit enterprises and projects, pay close attention to the impact of changes in energy conservation and emission reduction policies and the improvement of energy conservation and emission reduction standards on the cash flow of credit enterprises and projects, strengthen sensitivity analysis, and Timely adjust the loss write off and other aspects.
Article 19 Banking financial institutions should strengthen the management of credit contracts for enterprises and projects involving energy consumption and pollution risks, and conclude provisions related to energy consumption and pollution risks in credit contracts, including provisions for borrowers to declare compliance with energy conservation and emission reduction, and agree to accelerate the recovery of loans or suspend loans in case of failure to fulfill commitments or energy consumption and pollution risks; Agree to exercise the terms of mortgage and pledge in advance, and strictly monitor the risk of default.
Article 20 Banking financial institutions should strengthen personnel training and capacity building, accumulate professional knowledge related to energy consumption and pollution, and strive to improve their credit management ability for enterprises and projects involving energy consumption and pollution risks. We can train and introduce relevant professionals according to our business scale, the risk characteristics of the credit industry and customers, or obtain relevant professional services through third-party review or other effective service outsourcing methods.
Article 21 Banking financial institutions shall strengthen the information disclosure of energy conservation and emission reduction credit work, disclose their own energy conservation and emission reduction credit policies and standards, disclose the credit situation of enterprises and projects with major energy consumption and pollution risks, and accept the supervision of the market and stakeholders.
Article 22 The CBRC will take credit for energy conservation and emission reduction as an important part of the rating of financial institutions in the banking industry, link the evaluation results with the performance evaluation of senior executives of financial institutions in the banking industry under supervision, access to branches, and business development, and encourage the implementation of credit for energy conservation and emission reduction. Special inspection will be arranged for banking financial institutions with high energy consumption, high pollution industry credit ratio and fast growth rate. When necessary, external auditors will be required to pay attention to the credit risk and compliance risk of the audited banking financial institutions related to high energy consuming and high polluting enterprises and projects.
Part 3: Model Articles on Policy Risks of Financial Institutions
Key words: financial incentives, financial poverty alleviation, subsidized loans
In practice, financial input and financial support have always been important means of targeted poverty alleviation, affecting the growth of farmers' income. However, China has a large number of poor people and a deep degree of poverty. Up to now, there are more than 30 million people living in poverty in China. To ensure that the key task of poverty alleviation is completed on schedule in 2020 and that the people out of poverty do not return to poverty, it is necessary to promote fiscal and financial linkage, optimize resource allocation, and establish a support mechanism for sustainable development.
1、 Main Problems Faced by Financial Poverty Alleviation
First, the total amount of financial funds is insufficient. In 2016, China's central government allocated 66.7 billion yuan of special poverty relief funds, an increase of 43.4% over the previous year, in the face of the overall macroeconomic downturn and prominent contradiction between fiscal revenue and expenditure. Financial poverty alleviation funds provide a strong guarantee for rural poverty alleviation. However, compared with the huge demand for poverty alleviation, financial investment is limited and can only play a complementary role.
Second, the policy of subsidized interest loans for poverty alleviation is nominal. The main purpose of discount interest is to reduce the use cost of funds and help poor farmers and enterprises make better use of bank funds. However, banks are profit oriented and pay special attention to risk control. Most of the truly poor lenders cannot provide collateral or guarantors that meet the bank's requirements. Since they cannot borrow money, the financial policy of poverty alleviation discount loans will not work.
Third, poverty alleviation funds are not well managed. At present, local financial poverty alleviation funds mainly include: financial poverty alleviation funds, work relief funds, old area development funds, minority funds and project management fees. The fund management involves many departments such as Poverty Alleviation Office, Finance Bureau, Civil Affairs Bureau, Development and Reform Bureau, etc. Some departments are arbitrary, do not cooperate with other departments, and spend limited funds on "good looking poverty alleviation" for political achievements. In addition, the department in charge of the project does not care about the money, and the department in charge of the money does not care about the project, which often makes it difficult for the poverty relief funds to be available on time and in full, leading to the project missing the best implementation time. After the funds are in place, the supervision of the relevant departments on the use of funds is often absent, and only the way of post audit supervision is adopted, which makes the poverty relief funds allocated by the finance fail to play its due role.
2、 Main Problems Faced by Financial Poverty Alleviation
Subjectively, financial institutions are not active in poverty alleviation. At present, the national competent department has not designated a financial institution to undertake the function of financial poverty alleviation, so almost all financial institutions are involved in poverty alleviation at the request of local governments. On the surface, all financial institutions are helping the poor, but in fact, there are few financial institutions that are doing their best to help the poor. Financial institutions are enterprise legal persons who are responsible for their own profits and losses. Poverty alleviation based on political tasks can only be effective in the short term. In the long term, it is necessary to follow the market rules and form a benign market poverty alleviation mechanism.
Objectively, institutional factors make the allocation efficiency of poverty alleviation funds of financial institutions low. The main reasons are as follows:
First, there is a lack of poverty alleviation policy financial institutions. Policy based financial institutions have few branches at the county level, and remote areas with inconvenient transportation and poor natural environment should be the focus of poverty alleviation. In terms of support to these areas, policy based financial institutions often appear to be powerless.
Secondly, the poverty alleviation policy guarantee is missing. Although financial institutions regard financial poverty alleviation as a political task or social responsibility, the nature of enterprises determines that they must consider risks and benefits when issuing loans, and the requirements for interest and guarantee follow the general laws of financial operation. At present, the state encourages financial institutions to reduce the loan interest rate of poverty alleviation characteristic industries and extend the loan term, requires financial institutions to further give preferential interest rates to the "two basic" construction loans of poor villages, and sets a lower interest rate for poverty alleviation loans than the rate for agriculture support loans, but there are no specific operating methods and regulations, and there is no clear question of whether the central or local finance will subsidize interest, This makes it difficult for financial institutions to implement.
Thirdly, the poverty alleviation policy insurance and risk compensation mechanism are lacking. The poor households' assets available for mortgage and pledge are poor in quality and quantity, which is difficult to meet the requirements of financial institutions. The country lacks the corresponding top-level design of insurance and risk compensation. In addition, the local finance has limited funds available for risk compensation or interest subsidy and exemption, making policy financial institutions and commercial financial institutions conservative and cautious about poverty alleviation loans. In this case, many financial institutions are difficult to achieve the targets issued by the provincial government, and the sustained and long-term financial poverty alleviation investment is even more difficult to achieve.
3、 Necessity of financial linkage
The financial industry itself is a highly indebted industry, and agriculture has a natural weakness, which makes the financial poverty alleviation cause face high risks. The information asymmetry, high dispersion and other characteristics of rural credit also increase the operating costs of financial institutions. It is difficult to achieve the grand goal of poverty alleviation on schedule by relying solely on financial poverty alleviation. However, the existence of such problems as the small amount of financial funds and inadequate management makes it impossible for financial funds to play a major role in poverty alleviation. Based on the above analysis of the main problems faced by financial poverty alleviation and financial poverty alleviation, it can be seen that if the government wants to improve the efficiency of poverty alleviation resources and achieve the goal of poverty alleviation, it is necessary to make good use of the respective functions and advantages of finance and finance, establish a sound and reasonable mechanism, so that the two can cooperate and work together.
4、 Countermeasures and suggestions for financial linkage
First, improve the rural social security system and infrastructure, and reduce the cost of financial poverty alleviation. The capital demand of farmers mainly comes from basic living security, housing, medical care, education, production and other aspects, most of which are living consumption expenditures, belonging to public goods, which should be mainly solved by financial input and supported by policy finance. A sound rural social security system can reduce the information cost of commercial financial institutions to distinguish between living consumption and productive consumption, and reduce the difficulty of credit investigation and information asymmetry. In addition, the construction of rural public roads and agricultural projects supported by the central and local finance can reduce the management cost of commercial financial institutions' post loan guidance, help increase the economic strength of poor farmers, and reduce the risk of not being able to recover loans on schedule.
Second, give tax preference to reduce the burden of financial poverty alleviation entities. At present, the business tax rate of China's financial industry is about 5%, which is relatively high compared with other industries. Although the heavy tax policy is conducive to raising financial revenue, it is very unfavorable for rural financial institutions or non rural financial institutions to engage in agricultural businesses. The management cost in the rural financial sector is high, the risk is high, and the unreasonable tax burden often causes the profitability and competitiveness of the financial industry to decline, affecting the smooth operation and healthy development of the financial poverty alleviation cause. In addition, the finance should also increase tax support for leading poverty alleviation enterprises. The burden of financial poverty alleviation targets will be reduced, and the loans issued by financial institutions will be more secure.
Third, improve the rural guarantee system, improve the insurance and risk compensation mechanism, and reduce the risk of financial poverty alleviation. Guarantee companies provide guarantee for farmers and small and micro enterprises in villages and towns, which can alleviate the problem of rural financial institutions' reluctance to lend to a certain extent and increase the effective supply of rural finance. Therefore, finance at all levels can take part of the agricultural support funds as the funds for developing farmers' financing guarantee companies and credit guarantee companies, so as to promote the development of rural financial markets with less financial input. In addition, encouraging policy oriented agricultural insurance business of commercial insurance companies, exploring characteristic insurance products suitable for the development of poor areas, developing continuous underwriting, unified insurance and other ways to reduce the loss risk of lenders, is also conducive to enhancing the enthusiasm of financial poverty alleviation. The finance department shall also set up a poverty alleviation credit risk compensation fund based on counties, and award financial institutions that meet the assessment requirements. For the non-performing assets that cannot be recovered, the fund should be provided with an appropriate proportion of capital injection, and financial and tax policies to encourage asset securitization of financial institutions should be formulated to alleviate the worries of financial poverty alleviation fund investment.
Fourth, the government provides training services to create an honest and trustworthy rural financial environment. Poverty alleviation loans are generally targeted at poor farmers who have filed cards. They live in scattered places and have poor risk resistance. Many people have weak sense of integrity. It is difficult for financial institutions to manage loans. Finance should increase the input of training funds, not only to enable farmers to have skills, but also to publicize laws and regulations, strengthen farmers' integrity awareness, enhance their willingness to take the initiative to repay, and cultivate a sustainable rural credit market.
In general, the key to a successful poverty alleviation campaign is integration. The financial sector should lay a good foundation, leverage the credit input of financial institutions, use the strong investment and financing capabilities of the financial market, and strengthen the synergy of targeted poverty alleviation policies, so as to achieve the transformation from "blood transfusion" poverty alleviation to "blood production" poverty alleviation.
Author: Chang Jing
References
Part 4: Model Articles on Policy Risks of Financial Institutions
In recent years, in order to prevent and resolve financial risks, the head office of the People's Bank of China has positioned the main function of the branches within the system to strengthen financial supervision and ensure the financial safety of one party. From the perspective of maintaining the stability of financial order, this measure is correct, but in the process of functional transformation of the branches of the People's Bank of China, the basic function of monetary policy implementation of financial institutions within the jurisdiction of the organization has been ignored and weakened to a certain extent. In practical work, there is a high requirement for financial supervision, prevention and resolution of financial risks, but the function of correctly implementing monetary policy is not played enough, which affects the realization of monetary policy objectives to a certain extent. Therefore, how to improve the operating environment of monetary policy while implementing effective regulatory means is a major issue that the central bank must seriously study and solve at present.
1、 Under the general trend of financial globalization, China's monetary policy objectives and financial supervision orientation are facing difficult choices
（1） The implementation of monetary policy is not compatible with the financial supervision, which affects the implementation effect of monetary policy. In recent years, the People's Bank of China has taken a series of measures to strengthen supervision and has received corresponding results, such as increasing efforts to assess the non-performing loans and profitability of financial institutions, but this practice has doubled the transaction costs of credit activities and objectively played a role of institutional barriers. Under the strict supervision of the People's Bank of China, the government and financial institutions attach great importance to preventing financial risks. All financial units have generally strengthened risk control, linked loan risks with personal interests, and increased the responsibilities of credit officers. However, while the risk constraint mechanism was strengthened, the corresponding relatively perfect interest incentive mechanism was not established. The responsibility and interest were asymmetric, and the credit personnel were under heavy pressure to restrain loans and fear capital. At the same time, the People's Bank of China has taken the establishment of a financial security zone as its preferred regulatory goal, put risk supervision in the first place, increased the assessment of non-performing loans and profitability, implemented financial regulatory responsibilities, and took responsibility at all levels to form a risk suppression mechanism from outside financial institutions. In this case, the higher the proportion of non-performing loans of financial institutions, the greater their task of reducing non-performing loans, and the less willing they are to lend. At present, commercial banks are concerned about the risk of loans, not the profit of loans. This situation has formed the "town loan" of financial institutions and restricted the expansion of total demand. If the total demand is relatively insufficient, it will become more difficult for enterprises to sell. The ability of enterprises to repay loans will decline, and the possibility of financial institutions to convert normal loans into non-performing loans will increase, and their profitability will decline. Non performing loans of financial institutions remain high, making them more conservative when granting loans, which will further aggravate the difficulties of enterprise production and operation. As the strength of regulation and rectification is increasing, but the strength of implementing monetary policy has not been strengthened accordingly, the channel for capital to enter the industrial sector from the financial sector has narrowed, and it has to circulate within the existing financial system, making it difficult to realize the expansion role of monetary credit.
（2） The incompatibility between the People's Bank of China's strict supervision of interest rates and the interest rate market decision-making mechanism required for the transmission of monetary policy has affected the indirect regulation of monetary policy. At present, under the condition that the People's Bank of China strictly supervises the interest rate, the degree of interest rate marketization cannot be too high, and the marketization of the allocation of monetary policy tools is still at a low level, weakening the effect of monetary policy. Although the People's Bank of China has expanded the range of interest rate adjustment and floating, and implemented market-oriented reform on foreign currency interest rates, the current interest rate management system is generally a control system. Under this control system, the level of interest rates does not fully reflect the price and supply and demand of funds, and it is difficult to effectively play the role of regulating funds. The effect of simply adjusting the interest rate level and the floating range of interest rate on the loan behavior of financial institutions is not obvious. When the economic boom is not good, the enterprise benefit is declining, and the credit risk is rising, the financial institutions will automatically reduce the loan and reduce the capital supply in order to avoid the risk. If the interest rate is determined by the market, the decrease in the supply of funds will drive the interest rate up, which will increase the expected earnings of financial institutions, which will correspondingly increase some loans. On the contrary, when the interest rate is still not open, the decrease in the supply of funds will not drive the price of funds up, and it is difficult to effectively stimulate the enthusiasm of financial institutions for loans. In addition, although China's money market has initially formed a unified national inter-bank borrowing market and bond market, the bill market and the market for large transferable certificates of deposit have not yet formed a scale, and the bill market has developed slowly, which limits the role of the People's Bank of China in regulating the loans of financial institutions and increasing the supply of basic currency through rediscount.
（3） The People's Bank of China has not established the authority to urge financial institutions to implement monetary policies, and the window guiding role of monetary and credit policies is difficult to really implement. The People's Bank of China at the grass-roots level lacks effective means in supervising financial institutions to implement monetary and credit policies. The "window guidance" is just a moral advice and a soft constraint. The decision-making power of loan procedures, loan orientation and quantity is still in the hands of financial institutions. Although the People's Bank of China at the grass-roots level emphasized the "window guidance" and capital guidance for financial institutions, it ignored the supervision and inspection of the effect of their implementation of monetary and credit policies, that is, more supervision, less inspection, more "soft constraints" and less "hard measures". As a result, the transmission line of monetary policy has undergone reverse changes: first, commercial banks are concentrating capital, power and customers from the bottom up; Second, the central bank is delegating power and allocating funds from top to bottom. In order to adapt to the development of market economy, pursue profit maximization and expand the living space, commercial banks will no longer adjust the monetary and credit policies of the central bank step by step. At present, the more effective means of the grassroots People's Bank of China are rediscount and agriculture supporting loans, which can guide financial institutions and support local economic development. However, the head office and branches have strict control over rediscount, and are difficult to play a more effective role.
（4） Too much emphasis is placed on preventing and resolving risks of small and medium-sized financial institutions, ignoring their due role in monetary policy transmission. Small and medium-sized financial institutions are dissociated from monetary policy transmission. Due to internal and external reasons, small and medium-sized financial institutions encountered difficulties in financing and some payment risks, which attracted high attention from governments at all levels and the People's Bank of China. They adopted comprehensive governance on the regulatory policies of small and medium-sized financial institutions, overemphasized risk prevention and resolution, and did not pay enough attention to their role in monetary policy transmission. There are two situations: first, credit is again concentrated in state-owned banks. In connection with this, the central bank's "window guidance" mainly faces state-owned banks, affecting the overall transmission of monetary policy. Second, deposits are concentrated in large banks, and deposits of small and medium-sized financial institutions grow slowly. In order to prevent liquidity risks, the financial system has maintained a high reserve ratio, and the currency derivative ability of the financial system has been suppressed.
2、 The Conception of Strengthening Financial Supervision and Promoting the Effectiveness of Monetary Policy
（1） Clarify the fundamental purpose of financial supervision, and correctly handle the relationship between financial supervision and economic development, supervision and supervision. At present, it is very necessary to tighten supervision, prevent risks, and promote the legal operation and steady development of financial institutions. However, if the supervision is improper and financial institutions are difficult to operate, the transmission of monetary policy will lose its sound financial foundation, which will bring negative effects to the national economy. Supervision must grasp the strength. We should properly handle the relationship between financial regulation and financial innovation. Financial supervision plays a dual role in financial innovation, which can not only promote its development, but also inhibit its development. Therefore, on the one hand, financial supervision should create a fair, orderly and stable competitive environment and development space for financial development and innovation, and actively encourage financial innovation; On the other hand, it is necessary to strengthen the supervision of financial innovation, and bring financial innovation into the framework of legal system and norms to ensure the realization of monetary policy objectives. It is necessary to strengthen communication with the supervised and form interactive supervision. In fact, supervision is interactive and two-way, and communication and exchange are an indispensable part of supervision. Therefore, supervisors should correctly understand the relationship between supervisors and the supervised, strengthen communication and exchange, master the actual situation of the supervised, and also make the supervised further understand the policies and standards of the Central Bank, and consciously accept supervision.
Part 5: Model Articles on Policy Risks of Financial Institutions
In recent years, in order to prevent and resolve financial risks, the head office of the People's Bank of China has positioned the main function of the branches within the system to strengthen financial supervision and ensure the financial safety of one party. From the perspective of maintaining the stability of financial order, this measure is correct, but in the process of functional transformation of the branches of the People's Bank of China, the basic function of monetary policy implementation of financial institutions within the jurisdiction of the organization has been ignored and weakened to a certain extent. In practical work, there is a high requirement for financial supervision, prevention and resolution of financial risks, but the function of correctly implementing monetary policy is not played enough, which to a certain extent has achieved the goal of monetary policy. Therefore, while implementing effective supervision means, how to improve the operating environment of monetary policy is a major issue that the central bank must seriously and solve.
1、 Under the general trend of financial globalization, China's monetary policy objectives and financial supervision orientation are facing difficult choices
（1） The implementation of monetary policy is not compatible with the financial supervision, which affects the implementation effect of monetary policy. In recent years, the People's Bank of China has taken a series of measures to strengthen supervision and has received corresponding results, such as increasing efforts to assess the non-performing loans and profitability of financial institutions, but this practice has doubled the transaction costs of credit activities and objectively played a role of institutional barriers. Under the strict supervision of the People's Bank of China, the government and financial institutions attach great importance to preventing financial risks. All financial units have generally strengthened risk control, linked loan risks with personal interests, and increased the responsibilities of credit officers. However, while the risk constraint mechanism was strengthened, the corresponding relatively perfect interest incentive mechanism was not established. The responsibility and interest were asymmetric, and the credit personnel were under heavy pressure to restrain loans and fear capital. At the same time, the People's Bank of China has taken the establishment of a financial security zone as its preferred regulatory goal, put risk supervision in the first place, increased the assessment of non-performing loans and profitability, implemented financial regulatory responsibilities, and took responsibility at all levels to form a risk suppression mechanism from outside financial institutions. In this case, the higher the proportion of non-performing loans of financial institutions, the greater their task of reducing non-performing loans, and the less willing they are to lend. At present, commercial banks are concerned about the risk of loans, not the profit of loans. This situation has formed the "town loan" of financial institutions and restricted the expansion of total demand. If the total demand is relatively insufficient, sales will become more difficult, the ability of enterprises to repay loans will decline, and the possibility of financial institutions converting normal loans into non-performing loans will increase, and their profitability will decline. Non performing loans of financial institutions remain high, making them more conservative when granting loans, which will further aggravate the difficulties of enterprise production and operation. As the strength of regulation and rectification is increasing, but the strength of implementing monetary policy has not been strengthened accordingly, the channel for capital to enter the industrial sector from the financial sector has narrowed, and it has to circulate within the existing financial system, making it difficult to realize the expansion role of monetary credit.
（2） The incompatibility between the People's Bank of China's strict supervision of interest rates and the interest rate market decision-making mechanism required for the transmission of monetary policy has affected the indirect regulation of monetary policy. At present, under the condition that the People's Bank of China strictly supervises the interest rate, the degree of interest rate marketization cannot be too high, and the marketization of the allocation of monetary policy tools is still at a low level, weakening the effect of monetary policy. Although the People's Bank of China has expanded the range of interest rate adjustment and floating, and implemented market-oriented reform on foreign currency interest rates, the current interest rate management system is generally a control system. Under this control system, the level of interest rates does not fully reflect the price and supply and demand of funds, and it is difficult to effectively play the role of regulating funds. The effect of simply adjusting the interest rate level and the floating range of interest rate on the loan behavior of financial institutions is not obvious. When the prosperity is not good, the enterprise benefit is declining, and the credit risk is rising, the financial institutions will automatically reduce the loan and the fund supply will decline in order to avoid the risk. If the interest rate is determined by the market, the decrease in the supply of funds will drive the interest rate up, which will increase the expected earnings of financial institutions, which will correspondingly increase some loans. On the contrary, when the interest rate is still not open, the decrease in the supply of funds will not drive the price of funds up, and it is difficult to effectively stimulate the enthusiasm of financial institutions for loans. In addition, although China's money market has initially formed a unified national interbank borrowing market and bond market, the bill market and the market for large transferable certificates of deposit have not yet formed a scale, and the bill market is slow, which limits the role of the People's Bank of China in regulating the loans of financial institutions and increasing the supply of basic currency through rediscount.
（3） The People's Bank of China has not established the authority to urge financial institutions to implement monetary policies, and the window guiding role of monetary and credit policies is difficult to really implement. The People's Bank of China at the grass-roots level lacks effective means in supervising financial institutions to implement monetary and credit policies. The "window guidance" is just a moral advice and a soft constraint. The decision-making power of loan procedures, loan orientation and quantity is still in the hands of financial institutions. Although the People's Bank of China at the grass-roots level emphasized the "window guidance" and capital guidance for financial institutions, it ignored the supervision and inspection of the effect of their implementation of monetary and credit policies, that is, more supervision, less inspection, more "soft constraints" and less "hard measures". As a result, the transmission line of monetary policy has undergone reverse changes: first, commercial banks are concentrating capital, power and customers from the bottom up; Second, the central bank is delegating power and allocating funds from top to bottom. In order to adapt to the development of market economy, pursue profit maximization and expand the living space, commercial banks will no longer adjust the monetary and credit policies of the central bank step by step. At present, the more effective means of the grassroots People's Bank of China are rediscount and agriculture supporting loans, which can guide financial institutions and support local economic development. However, the head office and branches have strict control over rediscount, and are difficult to play a more effective role.
（4） Too much emphasis is placed on preventing and resolving risks of small and medium-sized institutions, ignoring their due role in monetary policy transmission. Small and medium-sized financial institutions are dissociated from monetary policy transmission. Due to internal and external reasons, small and medium-sized financial institutions encountered difficulties in financing and some payment risks, which attracted high attention from governments at all levels and the People's Bank of China. They adopted comprehensive governance on the regulatory policies of small and medium-sized financial institutions, overemphasized risk prevention and resolution, and did not pay enough attention to their role in monetary policy transmission. There are two situations: first, credit is again concentrated in state-owned banks. In connection with this, the "window guidance" of the central bank mainly faces state-owned banks, which comprehensively transmits monetary policy. Second, deposits are concentrated in large banks, and deposits of small and medium-sized financial institutions grow slowly. In order to prevent liquidity risks, the financial system has maintained a high reserve ratio, and the currency derivative ability of the financial system has been suppressed.
2、 The Conception of Strengthening Financial Supervision and Promoting the Effectiveness of Monetary Policy
（1） Clarify the fundamental purpose of financial supervision, and correctly handle the relationship between financial supervision and supervision, and between supervision and supervision. At present, it is very necessary to tighten supervision, prevent risks, and promote the legal operation and steady development of financial institutions. However, if the supervision is improper and financial institutions are difficult to operate, the transmission of monetary policy will lose its sound financial foundation, which will bring negative effects to the national economy. Supervision must grasp the strength. We should properly handle the relationship between financial regulation and financial innovation. Financial supervision plays a dual role in financial innovation, which can not only promote its development, but also inhibit its development. Therefore, on the one hand, financial supervision should create a fair, orderly and stable competitive environment and development space for financial development and innovation, and actively encourage financial innovation; On the other hand, it is necessary to strengthen the supervision of financial innovation, and bring financial innovation into the framework of legal system and norms to ensure the realization of monetary policy objectives. It is necessary to strengthen communication with the supervised and form interactive supervision. In fact, supervision is interactive and two-way, and communication and exchange are an indispensable part of supervision. Therefore, supervisors should correctly understand the relationship between supervisors and the supervised, strengthen communication and exchange, master the actual situation of the supervised, and also make the supervised further understand the policies and standards of the Central Bank, and consciously accept supervision.
Part 6: Model Articles on Policy Risks of Financial Institutions
1、 Problems in the Development of New Rural Financial Institutions in China
1. High operating costs, narrow financing channels, low returns and high risks
(1) From the perspective of its internal factors, the micro loan company's internal governance structure is not perfect, the enterprise's internal control system is not perfect, the enterprise size is small, and the operating capital is less, resulting in large operational risks, while risk management can not keep up with the needs of the enterprise, which further increases the security risks of the enterprise.
From the analysis of external environmental factors, microfinance companies are rural financial institutions formed in recent years, with low social recognition, few service products to provide, and low profitability; These companies have a narrow network coverage. Most of them are in rural and remote areas. They can attract less deposits and are difficult to finance. Their customers are small agricultural micro enterprises and farmers in rural areas. As a result, the demand for loans from customer groups is small, and the frequency of loan behavior is high, which increases the operating difficulties of microfinance companies. At the same time, these customers have economic difficulties There are few collateral and low value. In addition, their operation depends on changes in the natural environment, and their ability to resist risks is low. This will also increase the operating risks of microfinance companies and reduce their earnings.
(2) Rural bank deposits: enterprise deposits are higher than savings deposits, demand deposits are higher than fixed deposits, and deposits depend on key customers. Rural bank outlets are mostly located in the county seat, and the idle funds of county residents are limited, which limits the increase of savings deposits in rural banks. Like small loan companies, rural banks have low social recognition and single service products, which cannot meet the diversified needs of customers, resulting in poor deposit absorption capacity, and small deposit scale, which affects the loan issuance of rural banks. The establishment of village banks requires more capital investment. In order to attract more funds and talents, more remuneration is paid during the operation process, which increases the operating cost and reduces the profit space. Compared with small loan companies, the operation mechanism of village banks is more mature, and the internal control system of enterprises is also more perfect. However, the internal operation of rural banks is uneven. Some rural banks have poor internal control environment and lack of risk management awareness and system, which increases their operational risks.
2. Large talent demand gap
(1) With the development of economy, the demand for small loan companies has increased, and the company needs to expand its scale, but also faces the increasing demand for counterpart talents. At this stage, the number of employees of small loan companies is relatively small compared with large financial institutions, which can not meet the needs of the company. At the same time, the overall level of professional quality of employees is also low, and the development status of the company is difficult to attract high-quality and complex management talents. The talent gap makes it difficult for microfinance companies to establish a sound human resource management system, and also restricts their further development.
(2) Rural banks are facing a talent gap while constantly improving, and training professionals is also an arduous task for rural banks. Due to the special working location of village banks, most of them are located in county-level villages and towns, and the required employees have insufficient experience and business skills, and are less professional. However, with the continuous expansion of business, they need to gradually establish their own cadre and staff team to promote the further development of village banks.
3. Less government support
In recent years, China has successively introduced a series of policies to help the development of small loan companies and rural banks. However, various fiscal and tax policies around the country have not yet met the development needs of small loan companies and rural banks, and failed to create a good financial environment suitable for the development of small loan companies. At the same time, the establishment of China's rural financial legal system is not perfect, and the development of credit environment, insurance and guarantee system is relatively slow and backward, affecting the healthy development of small loan companies and rural banks.
4. Service object deviation
The groups served by microfinance companies and rural banks are small and micro rural enterprises and farmers, helping to further develop the rural economy. However, at this stage, most of these rural financial institutions' outlets are located in county and urban areas, and the proportion of township outlets is relatively low. Less than half of the loans of such financial institutions involve rural loans, and the target of big customers is also large enterprises. The above operation modes make the establishment of rural financial institutions deviate from the original goal.
2、 Countermeasures for the Development of New Rural Financial Institutions in China
（1） Improve the internal management system of new rural financial institutions and improve their own development capacity
1. Strengthen risk management and improve corporate governance
New rural financial institutions need to hire professionals according to their own conditions to formulate and improve the internal control system of enterprises and establish a risk management system. The ability to resist risks can be improved by establishing a supervision and balance mechanism, strengthening personnel quality assessment, strengthening loan management, and establishing an internal audit system.
2. Innovate rural financial service products based on market demand
Innovate financial products and services, and change the situation of single products. Design new financial products according to the needs of rural enterprises and farmers, attract rural capital demanders to deposit and lend in rural financial institutions, and retain customers through diversified and localized products and services.
3. Establish and improve the human resources management system
In view of the talent gap of new rural financial institutions, establish and improve the human resources management system. In order to make the organization operate efficiently and safely, and make great progress, a series of measures are formulated to attract talents and train senior managers. The level of human resources management can be improved by formulating human resources planning in line with the institution, recruiting professionals, improving wages and benefits, and actively promoting and training employees.
4. Create enterprise brand and improve social recognition
New rural financial institutions should improve their service quality, highlight their service characteristics, create corporate brands and improve social popularity. Institutions can improve their visibility and expand their influence through media publicity, visiting farmers and rural micro enterprises, and carrying out financial knowledge publicity in rural areas, so as to gain social recognition.
（2） Optimize the external environment for the development of new rural financial institutions and provide policy support
1. Improve rural financial laws and regulations and give policy deviation
The further development of China's new rural financial institutions needs a sound legal and regulatory system, with the support of the government. China can promote the sound development of institutions through various measures: solve the funding problem of new rural financial institutions, help them broaden their financing channels, and increase their funding sources by appropriately restricting their lending and financing; Formulate policies to help new rural financial institutions join the existing payment and settlement system and credit reporting system; Expand the breadth and depth of the policy of benefiting the people, establish a subsidy system for agricultural loan institutions, encourage institutions to carry out loan business in rural areas, and help institutions reduce business risks; Reduce the regulation on market interest rate and improve the operating freedom of institutions.
2. Strengthen supervision and control financial risks
The regulatory authorities should set up early warning and prevention mechanisms for financial risks, maintain a safe and stable financial market, prevent and prevent unfair competition in the financial market, and maintain the order of the rural financial market. The regulatory authorities can help new rural financial institutions strengthen risk prevention and guide new rural financial institutions to establish risk management systems through training, publicity and other ways.
Part 7: Model Articles on Policy Risks of Financial Institutions
Key words: macro prudential policy; Systematic risk; Countermeasures; Analysis and discussion
Economic globalization can drive the development of the world economy, but there is inevitably a crisis. The deeper the economic globalization is, the more cost losses caused by the crisis will increase. For example, the outbreak of the financial crisis in 2008 has made the relevant financial departments pay more attention to the role of economic supervision, Set prudent policies to prevent risks caused by some financial institutions from spreading to the whole industry, and reduce unnecessary losses through regulation. In order to reduce the probability of systematic risks, we should not only maintain micro prudential regulation, but also strengthen macro prudential policies, find the causes of different risks and establish corresponding defense facilities to ensure the healthy and safe operation of the financial market.
1、 Causes and classification of systematic risks
（1） Factors leading to systematic risk
There is no mistake in risk itself, and it cannot be completely eradicated. The key lies in the understanding of risk. For example, the financial crisis that occurred in the past was to misunderstand and distort the assessment of the value at risk, which led to serious losses in the social economy and had a significant impact on the stability of the social and economic order. How to apply macro prudential policies to control systemic risks? As far as the assessment method of systemic risks is concerned, we should consider where these risks originate and how they are spread.
Systematic risk can be assessed from the internal friction of finance and the transmission path of systematic risk. We know from the micro prudential system that the economic market failure caused by financial internal friction has been proved in practice, so we pay more attention to how financial internal friction spreads in the financial system and the social economy. Its transmission channels include leverage and term conversion. Leverage regulates the size of assets and their corresponding debt ratio; Term conversion stipulates the extent to which short-term liabilities are applied to long-term investments. Both of them play a key role in social economy. For example, in a family whose income is interrupted for some reason, normal consumption activities can still be carried out through debt. Term conversion allows people to use social funds for long-term investment. From the purpose of setting, the original intention of the two is good, but they are overused by people, which is beyond the scope of the current social economy. At this time, the current systemic risk will arise. If this phenomenon is more common, it will lead to a comprehensive financial storm, which will impact the social economy.
（2） Classification of systematic risks
Through analysis, we know that the potential cause of the systemic risk crisis is the failure of the economic market caused by the internal friction of finance, which has stimulated the excessive use of leverage and term conversion by people, thus accelerating the liquidity of social funds and the insufficiency of people's solvency, which has impacted the overall social economy.
1. Comprehensive risk
In the social economy, individuals, companies and banking systems are clustered. For example, they strive for higher interests in the prosperous period of the economy, but tend to avoid them in the weak period. This feature will show cyclical fluctuations with the use of the financial system and term conversion. Therefore, once the peak value of this fluctuation exceeds the tolerance range of the social economy, It will cause excessive fluctuations in the overall economy, and the cycle of credit and capital flows will also fluctuate significantly. In addition, few people make correct judgments on the amplitude and duration of fluctuations in each cycle of the social economy, and the individual financial sector and relevant supervision institutions often ignore the preparation for comprehensive risks of industrial nature, This will lead to social and economic turbulence. This situation is mainly caused by three reasons: cumulative term mismatch, individual risk with a holistic view, and blind imitation of effective strategies.
2. Network risk
When many financial institutions adopt the development method, they often take maximizing their own interests as the principle choice, and seldom care about the spillover consequences of their actions on the entire financial industry, and also seldom notice the impact of other people's choices on their own liabilities. This phenomenon may cause some risks in the financial system not to be found in time and effectively controlled. In this regard, the network risk of financial structure is an additional financial system risk. Every financial institution has the responsibility to cause this risk, but no one has sufficient reasons to solve and eliminate the network risk. During the outbreak of the financial crisis, the risk spillover effect is more obvious, and the contagion of fear is more harmful than the expansion of the financial crisis. Spillover effect can amplify liquidity risk. For example, some banks sell their assets in large quantities for some reason, which damages the normal liquidity of the market economy and indirectly leads to the loss of other banks' interests. With the spread of network risk in financial institutions, it will expand slowly. In the long run, the connection between financial enterprises will greatly exceed their own expectations. This requires a strong rule to restrict the spillover effect caused by aggregation. Macroprudential policies are good medicine for these risks.
2、 Implementing macro prudential policies to deal with systemic risks
The importance of implementing macro prudential policies to deal with systemic risks can be seen from the full discussion of systemic risks. Since there are many possibilities to lead to risks, when macro prudential policies effectively control systemic risks, they should be handled according to different risk sources and transmission channels. On the basis of ensuring that risk effective investment can be made to maintain the stable operation of the social economy in the event of economic downturn, relevant policies should be formulated reasonably to effectively control risks and strengthen the adaptability of the social economic system in the cycle of liquidity fluctuations.
（1） The increasing vulnerability of comprehensive risks to the collective financial institutions of the financial system
The purpose of formulating macro prudential policies is to reduce the probability of occurrence of continuous comprehensive risks in the period of economic prosperity, make financial institutions more resilient when dealing with crises, and ensure that the financial system can automatically return to normal when deviation occurs. Theoretically, many policies can regulate and control the relevant risks of banks, but according to practice, whether the supervision and management of assets and liquidity can have a significant effect depends largely on whether the leverage effect and maturity mismatch in risk transmission can be effectively controlled.
1. Keep the balance of credit leverage. In order to maintain the balance of credit leverage, the simplest and feasible approach is to add a surcharge provision on the premise of the content of the micro prudential provisions to estimate the possible losses. Surcharges should be increased with the rapid increase of credit volume and the increase of comprehensive risk, so as to increase the cost of loans; When the economy is in recession, additional charges should be reduced or no effort should be made to maintain the balance of credit supply. The adverse consequences caused by comprehensive risks can be avoided as far as possible by setting counter cyclical adjustment measures for surcharges. In practical application, various standards should be considered, such as evaluating the standard of efficient market structure, setting the amount of surcharges according to the results, and developing indicators of financial system stability using macro prudential standards. All these results are used to evaluate the level of comprehensive risk.
2. Reduce the probability of maturity mismatch. China has a large demand for medium - and long-term loans. The development trend of bank deposit demand and medium - and long-term loans is becoming more and more significant. The mismatch of bank asset maturity structure is aggravated by the short deposit and long loan of working capital, and the related risks are constantly emerging. The more effective measure to be implemented now is to put different types of asset portfolios under deteriorating market conditions to carry out stress related tests, observe the changes of key different variables with the change of stress, and judge the current economic risks according to the structure. This approach requires the government to specify the market pressure to test whether the financial system can really adapt to the pressure and operate normally.
（2） Spillover effect caused by network risk related aggregation
The increase of the probability of occurrence of comprehensive risks has a positive effect on the increase of the default rate of the financial system, while the increase of the probability of occurrence of relevant network risks has increased the default losses. For example, some banks fail due to poor operation, and their failure will bring indirect additional profit losses to other banks, while individual institutions are unable to fully solve the losses caused by themselves. To solve this problem, the macro prudential policy approach to network risk is to set up relevant incentive systems to reduce the losses of other institutions caused by individual collapse.
1. Prevent the collapse of key institutions and reduce spillover effects. In practical application, the macro prudential policy should reasonably set a surcharge on the financial system to reflect the current situation of the overall market, set higher surcharges on key financial institutions such as large banks and other institutions, and give corresponding incentives to adjust their own liabilities and assets, so as to achieve indirect control over other financial institutions to prevent their collapse, from individual to scope, Realize the good effect of controlling small and controlling large. Therefore, the capital requirements of financial institutions are not only to meet their own conditions, but also to consider the spillover effects when they face risks.
2. Reduce the capital flow among financial industries and reduce their network relevance. The macro prudential policy can not only achieve the purpose of controlling the network risk by formulating surcharges to prevent the failure of key institutions, but also control the spread of network risk by limiting the activities between financial industries. First of all, it is obvious that to achieve this goal, it is necessary to limit the capital flow among financial institutions. For example, set the limit amount of interbank lending to reduce the relevance and complexity of financial networks. Secondly, some non quantitative means should be used to limit the capital flow in the industry, and foreign advanced experience should be used to set up branches for financial institutions across regions to maximize their distribution to different places to reduce their relevance; Strictly separate the core trading activities of financial institutions from other institutions to prevent the spread of network risks. Finally, the control of some micro prudential indicators can also achieve the effect of macro control.
3、 Some suggestions on relevant policies
First, try not to excessively use the relative ratio as the index of macro-control. The relative ratio covers the difference of the real amount, and excessive pursuit of results may lead to the opposite consequences. The second is to plot the function of dynamic additional costs and risk escalation. Increase the ratio of capital to assets during economic recession to reduce the operating pressure in the face of crisis. Third, improve the quality of supervision and management capital. Supervisors and managers should not only use the ratio of tier one capital to grasp the asset risk situation, but also link it with common equity to strengthen the effectiveness of supervision and management. Fourth, limit the liquidity between debt maturity and assets. The wrong use of them will lead to excessive leverage and maturity mismatch, which will accelerate the spread of systemic risk. Fifth, we should restrict bank branches. Sixth, it is necessary to control the exchanges of financial activities in the industry and strengthen the independence of individual financial institutions to reduce systematic risks in the industry.
4、 Conclusion
Based on the above discussion, the macro prudential regulation of the financial market system should take the control of systematic risk as the core. It is very important to fully discuss the systematic risk on the basis of formulating macro prudential policies, which can help to draw the contents of the objectives set by relevant macro prudential policies. Because the relevant regulation policies of comprehensive risk and inter institutional network risk in the financial industry have different effects on reducing systemic risk, we can control different risk transmission channels and implement targeted macro prudential policy regulation, which can reduce the probability of overall risk in the financial system market and achieve the results of preventing the outbreak of financial crisis.
reference:
[1] Zhang Chendong, Li Weibing Macro prudential supervision policy analysis under systematic risk decomposition [J]. Wuhan Finance, 2011 (5)
[2] Liu Guangwei Systematic risk, macro prudence and the relative independence of the central bank [J]. Southwest Finance, 2011 (5)
[3] Bao Yongen On the reform direction of financial supervision system at the macro prudential level [J]. Time Law, 2013 (1)
[4] Tu Zhiyong, Ju Lan On the role of credit derivatives in the macro prudential policy framework [J]. Shanghai Finance, 2012 (8)
Chapter 8: Model Articles on Policy Risks of Financial Institutions
Author: Li Huanping Lin Yu Unit: Yanbian Central Sub branch of the People's Bank of China
Risk status of small and micro enterprises and feasibility analysis of small and micro financial institutions supporting small and micro enterprises
The loans are generally paid off quarterly, monthly and annually, and small financial institutions in the state pay special attention to risk prevention. For example, at the beginning of the establishment of Dunhua Jiangnan Rural Bank in 2007, the loan procedures were simple and loose, resulting in some risky loans. After the problem was exposed, the Bank standardized and rectified the internal loan procedures, went deep into the enterprise to make a thorough investigation, adopted additional collateral, increased guarantees and other ways to ensure the security of loans, and closely followed the production and operation of the enterprise, effectively resolving the risk. It is understood that there is no non-performing loan in the bank's 12.7 million loans to small and micro enterprises. As targeted preventive measures have been taken, the non-performing loan rate of small and micro enterprises in the state's financial institutions has declined year by year, mostly to less than 1%. For a long time, the large and medium-sized banks in China's banking system have occupied an absolute dominant position. Although the number of small financial institutions and quasi financial institutions is gradually increasing, they are still in the non mainstream in the banking system. Data shows that at present, the deposit market of national banks accounts for 77%, and the loan market accounts for 80%. If the deposits and loans of trust and investment companies, auto finance companies, finance companies and other institutions are deducted, the market share of local small financial institutions is less than 20%. Zhang Chenghui, director of the Financial Research Institute of the Development Research Center of the State Council, recently wrote that "the existing indirect financing system has structural defects. Only by accelerating the development of small and medium-sized financial institutions and establishing a comprehensive, multi-level and differentiated financing service system for small and medium-sized enterprises, can the structure of the indirect financing system be effectively improved". To sum up, local small and medium-sized financial institutions are the main force of financial support for small and micro enterprises, and the development of small and medium-sized financial institutions is the key to financial support for small and micro enterprises. First, the credit of large financial institutions focuses on large enterprises, large projects and large cities. In 2011, the new loans of Yanbian Prefecture were 1.6 times higher than that of 2010, but the new loans of the five major banks of industry, agriculture, China, construction and communications only accounted for 23.08% of the new deposits in the same period; The deposit loan ratio of the newly added part of the local financial institution Rural Commercial Bank in 2011 was 35.58%, 12.5 percentage points higher than that of the five major banks. Smaller financial institutions, such as rural banks, rural credit cooperatives and microfinance companies, have higher deposit to loan ratios of small and micro enterprise loans to new deposits. Second, the national policy of supporting small and micro enterprises is vulnerable to the impact of commercial banks' business strategies in the transmission process. Because commercial banks take profit maximization as their business objective, the policy effect will be amplified only when the national industrial policy is consistent with the bank's business objective, and on the contrary, it will decrease. Under the current management system, this basic principle should not and will not be violated. The head office has the right to formulate the business strategy of large banks, while only small and medium-sized financial institutions have the right to position themselves locally. The development of small and medium-sized financial institutions has become an inevitable way to support the development of local small and micro enterprises.
Several Problems Should Be Grasping in Developing Small and Medium sized Financial Institutions
First, we need to further adjust the current access policy for small and medium-sized banks. Including the development of urban community banks funded by the society and at their own risk; Revise the market access management measures of rural banks and adjust the regulatory policies, so that rural banks can develop rapidly; Expand the financing channels of small loan companies, and formulate unified regulatory standards and risk control requirements for small loan companies to increase their lending capacity; Rationally define the boundary between private financing and illegal fund-raising, and standardize private lending behavior. The second is to solve the problem of insufficient financial supervision capacity at the county level. In order to develop small and medium-sized financial institutions, we must strengthen external supervision, especially strengthen the supervision power at the county level. At present, the lack of county financial supervision is not only reflected in the absence of the CIRC, the CSRC and other institutions, but also in the fact that the number of staff in the banking regulatory institutions is only two to three. It is also reflected in the fact that the county (city) branches of the People's Bank of China have not conducted industry supervision for a long period of time, and the current knowledge structure and age structure of the staff are unreasonable. The adaptability to the work of "two management, two integration and one protection" is not very strong, and more manpower and material resources need to be invested in the cultivation of regulatory capacity. The lack of county supervision will increase the industry risks faced by the development of small and medium-sized financial institutions in the county in the future. It is necessary to take targeted measures in advance, such as accelerating the extension of insurance, securities and other regulatory agencies to cities and prefectures, and entrusting relevant management functions to the branches of the People's Bank of China at the county level. At the same time, it is necessary to enrich the human resources of the people's banks at the county and city levels, make overall arrangements in terms of recruiting bankers, increasing staffing, etc., and constantly improve the ability of grass-roots regulators to perform their duties. Third, we should give major support to small and medium-sized financial institutions in terms of fiscal and tax policies. The business income tax burden rate of a small loan company in Hunchun City, Yanbian Prefecture is as high as 24.77%, which is far higher than the return rate of investors. If we want to achieve the sustainable development of financial support for small and micro enterprises, we should give small and medium-sized financial institutions to support small and micro enterprises with appropriate amount of tax exemption and risk compensation. Fourth, appropriate credit policy adjustments should be made according to the actual situation of small and medium-sized financial institutions supporting small and micro enterprises. In 2011, after the country issued the "National Nine Rules" to support small and micro enterprises, various ministries and commissions have also issued relevant preferential policies. However, these credit preferential policies are mostly guiding opinions, lacking specific targeted and operable measures. For example, the provisions on credit approval conditions and access thresholds for small and micro enterprises have not been substantially relaxed, and the relevant provisions on mortgage guarantees for small and micro enterprises have not been loosened. In the future, the loan approval procedures for small and micro enterprises should be simplified under the conditions of controllable risks to eliminate unreasonable charges. At present, consulting fees, evaluation fees, guarantee fees and other charges before loan issuance are a heavy burden for small and micro enterprises, and also make many small and micro enterprises flinch from loans.
Chapter 9: Model Articles on Policy Risks of Financial Institutions
Small rural financial institutions have been established for a short time with few service outlets and are extremely inconvenient to handle business. Some customers think that their private nature is very prominent, similar to "underground banks", and their social reputation and social credibility are far inferior to local rural credit cooperatives and postal savings banks. This leads to a long way to go in brand building and social reputation building of rural small financial institutions.
Main constraints on the innovative development of small rural financial institutions
（1） The cost compensation measures for rural financial services are not in place
At present, the marketization level of rural interest rates is relatively low, and it is difficult for financial institutions to cover all costs. In the case of limited floating range of interest rates, rural financial services lack adequate cost compensation mechanism. The financial discount and tax preferential policies of local governments to financial institutions are not strong enough, and the agricultural subsidy funds have not formed a joint force to support and encourage financial institutions to increase investment due to different sources and decentralized use.
（2） The risk diversification mechanism of rural financial services is not perfect
First, the development of agricultural insurance lags behind. Affected by natural conditions, market environment and policy factors, the risk and uncertainty of agricultural production are large. In addition, China's agricultural production is low in intensity, decentralized in operation, high in unit input cost, low in overall income level, and the risk of financial institutions' credit support for agriculture is increased. At the same time, due to the special attributes of high risk and high compensation of agricultural insurance, the market price of agricultural insurance products is significantly higher than the affordability of farmers, and agricultural insurance develops slowly. At present, the agricultural policy insurance business in most regions of China is still in its infancy and exploration stage. The insurance coverage is low, and the credit risk of supporting agriculture cannot be dispersed. Second, rural mortgage and guarantee resources are scarce. Limited by the existing rural property rights system, rural enterprises and natural persons have been lacking effective collateral assets, which objectively increases the risk of rural financial services.
（3） Incomplete rural financial service infrastructure construction
First, the construction of rural credit reporting system lags behind. At present, the construction of China's rural credit reporting system has just started. Restricted by the difficulties in collecting credit data and other factors, there are asymmetric and opaque information between rural economic organizations, natural persons and financial institutions, and the cost of financial institutions to obtain relevant information is high. The second is the lack of relevant institutional rules. Under the existing rural property rights system, there are large legal obstacles in the use right of rural cultivated land, rural housing, mortgage and circulation of homestead, resulting in the lack of necessary policy basis and corresponding protection measures for financial institution innovation. Third, the innovation capacity of agricultural financial institutions needs to be further improved. As the main force of the rural financial market, the rural credit cooperatives have made phased achievements in their reform, but there are still problems such as unclear property rights relations, imperfect internal management systems, lack of a complete talent introduction and training mechanism, and lack of talent and technical support for business management and business innovation.
Innovative Development of Small Rural Financial Institutions
Innovative development is the only way to solve the vulnerability of small rural financial institutions. Only through continuous innovation in financial system and policies, financial service products, financing channels, service concepts and methods, operation management system and incentive mechanism, risk control and internal control system, can we ensure the sustainable, stable and healthy development of small rural financial institutions in China.
（1） Innovation of financial system and policy
1. Financial system innovation. (1) Organizational system. The innovation of the organizational system is to further improve the legal systems such as the Interim Provisions on the Management of Rural Banks, the Interim Provisions on the Management of Loan Companies, and the Interim Provisions on the Management of Rural Mutual Fund Cooperatives. First, we should further clarify the nature and status of small rural financial institutions. In accordance with the Interim Provisions on the Administration of Rural Banks and the Interim Provisions on the Administration of Loan Companies, rural banks and loan companies must first invest their funds in the development of "agriculture, rural areas and farmers" to carry out foreign loan business. In order to meet the needs of "agriculture, rural areas and farmers" development funds, the 12th issue of the mid ten day issue of 2012 (the 501st issue in total) Times Finance NO.12, 2012 (Cumulativity NO.501) Under such conditions, surplus funds can be invested in other local industries. It is not difficult to find out from these regulations that rural banks and loan companies have been entrusted with the social responsibility of serving "agriculture, rural areas and farmers" and policy tasks. However, it is also stipulated that village banks and loan companies are "independent corporate legal persons", and they must follow the operating principles of general commercial banks of "safety, liquidity and efficiency", and implement "independent operation, risk bearing, profit and loss bearing, and self-discipline". Obviously, the above provisions are inconsistent and need to be further improved. Second, further standardize the investment subjects of rural small financial institutions and relax the access conditions. The Interim Provisions on the Administration of Rural Banks stipulates that only banking financial institutions can become the sponsor of rural banks, and the shareholding ratio cannot be less than 20%. The result is that although state-owned banks have many outlets and capital advantages, they are unwilling to initiate the establishment of village banks for economic benefits; Local commercial banks and foreign-funded banks are highly motivated, but they are restricted by a small number of outlets and a low market share; The participation of private capital is highly motivated, but it is not qualified to enter. Third, simplify the approval procedures and procedures of rural mutual fund cooperatives. According to the Interim Provisions on the Administration of Rural Mutual Fund Cooperatives and the Guidelines for the Examination and Approval of the Establishment of Rural Mutual Fund Cooperatives, we can find that the process of establishing rural mutual fund cooperatives is complex and the cost of establishment is high, which affects the enthusiasm of all parties to participate and also affects the development of rural mutual fund cooperatives. The minimum registered capital of the rural mutual fund cooperative is only 100000 yuan, which belongs to a micro financial organization. The approval procedure should be simplified, and the reporting and approval system can be implemented. (2) Credit evaluation system. The development of various businesses of rural small financial institutions cannot be separated from the credit evaluation of customers. Therefore, rural small financial institutions must speed up the construction of credit evaluation system. First, we should realize the computerization of customer credit records as soon as possible, establish a bank code for handling, access the People's Bank of China's credit database system as soon as possible, enter customer data in a timely manner, and share information with other financial institutions. Second, establish a credit registration and consultation system to investigate and rate the credit status of farmers and rural SMEs. (3) Security system. In order to prevent the external market risks faced by the development of rural small financial institutions, we must innovate the guarantee system according to the service objects. First, establish an effective mortgage and guarantee mechanism to gradually solve the problem of land circulation. Second, encourage farmers to jointly contribute to establish guarantee funds and provide mutual guarantee; Guide farmers to actively participate in agricultural commercial insurance. Third, we should actively explore various forms of guarantee for the mortgage and pledge of large-scale agricultural production equipment, forest rights, water areas and beaches, barren mountains, barren slopes and other assets. Fourth, we should establish a number of professional rural credit guarantee institutions, especially encourage powerful enterprises to participate in the construction of rural credit guarantee institutions and provide guarantee services.
2. Financial regulatory innovation. The supervision of small rural financial institutions cannot completely refer to the supervision model of commercial banks. Small rural financial institutions are in the early stage of development, with relatively thin profits, and cannot be too rigid. They need a more relaxed development environment. Therefore, they should be properly and prudently supervised. We should take capital supervision as the core, strengthen the supervision of credit risk, operational risk and liquidity risk, strengthen the supervision of controlling shareholders, and prevent the risks of connected transactions. In the interest rate pricing of small rural financial institutions, we should gradually loosen the restrictions on loan interest rates and give them the right to set their own prices. The business restrictions on small rural financial institutions should be gradually liberalized, and village banks should be allowed to raise funds through public issuance of bank bonds.
3. Financial policy innovation. The central government and local governments should increase support for the development of small rural financial institutions. First, the state should implement tax relief policies to reduce the tax burden of small rural financial institutions. Second, reduce the deposit reserve ratio of small rural financial institutions, allow them to apply for central bank re loans, and grant margin subsidies to policy loans provided by small rural financial institutions to serve "agriculture, rural areas and farmers". Third, provide credit investigation services, timely solve the problems of village banks joining the Central Bank's large and small payment system and cheque image exchange system, and solve the problems of village banks joining UnionPay, issuing bank cards and other payment and settlement problems. Fourth, the local government should give financial and material support, such as land acquisition; To support financial deposits, we can determine the amount of financial funds to be deposited in accordance with a certain proportion of the loan amount to solve the problem of insufficient supply of credit funds for small rural financial institutions.
（2） Innovation of financial service products
Small rural financial institutions should focus on creating financial products that serve "agriculture, rural areas and farmers", and develop and design different financial service products according to different customer targets, different customer financing, different loan methods, and different customer needs. Design and develop "personal credit business" and "personal financial package", such as personal micro loan, shop mortgage loan, personal business loan, personal durable consumer goods loan, personal car consumption loan, personal housing construction loan, medical loan and other personal financial service products; Design and develop "corporate credit business", such as corporate financial service products such as corporate owner operating loans, corporate operating loans, guaranteed loans of guarantee companies, pledged loans of accounts receivable, syndicated loans, etc. According to the regional economic and financial ecological environment and its own business orientation, develop and market bank card products suitable for migrant workers, financial settlement services suitable for rural areas and other intermediary business varieties. Encourage the development of innovative businesses, such as personal venture capital loans, owner financing loans, etc.
（3） Innovation of financing channels
First, it should be widely publicized, make full use of the brand and social popularity of the initiative, realize the brand effect of small rural financial institutions, and widely absorb social deposits; Mobilize shareholders to give priority to depositing their own or company's funds in village banks, so as to improve the social reputation of small rural financial institutions and drive local farmers and SMEs to deposit; Increase the number of shareholders to expand the source of funds; Strengthen communication and cooperation with rural professional cooperatives to absorb member funds.
Second, establish financing channels for large commercial banks to small rural financial institutions. Commercial banks can choose rural small financial institutions that operate with integrity and have good social reputation for wholesale loans. In this way, on the one hand, it solves the problem of insufficient funding sources for rural small financial institutions, on the other hand, it also opens up new credit channels for commercial banks and provides a new platform for commercial banks to participate in rural financial markets.
Third, explore the establishment of regional small capital markets, establish small and medium-sized capital markets to meet the needs of agricultural industrialization, actively develop the rural financial leasing market, establish direct financing channels, and allow more funds to enter the field of agricultural industrialization production. Fourth, encourage private capital to participate in rural investment and financing. First, encourage qualified small rural financial institutions to participate in money market business. The second is to encourage leading enterprises in agricultural industrialization to issue bonds or stocks for direct financing, so as to increase the source of funds for rural development. Third, vigorously develop the rural bill market, expand the scale of bill financing, increase the supply of funds, and solve the shortage of rural funds.
（4） Innovation of service concept and mode
1. Innovation of service concept. Small rural financial institutions should adhere to the business philosophy of "small banks, large services" and "service creates value", implement quality services to every business type, business process and business position, and strictly implement the "first question responsibility system" and "time limited service system".
2. Innovation of service mode. Establish a "one-stop" whole process credit quality service mechanism; Innovate credit extension methods, determine different credit lines, credit extension methods, guarantee methods and interest rate pricing according to different customer groups, different business models, different business seasons, different loan purposes and different customer needs; Establish a flexible service mechanism to meet customer needs anytime and anywhere. For example, some regional banks in the United States can send money when they call in the middle of the night.
（5） Innovation of management mechanism and incentive and restraint mechanism
1. Innovate the operation and management mechanism. We should correctly handle the relationship between the assistance of the general sponsor and the independence of small rural financial institutions, standardize the corporate governance structure, and fully respect the independent legal status of small rural financial institutions. The main sponsor should earnestly assume the responsibilities of the sponsor and give full and reasonable authorization to the rural small financial institutions in terms of human rights, administrative rights and financial rights; At the same time, we will give full guidance and support in risk management, clearing services, personnel training, system building, etc.
2. Innovation of incentive and constraint mechanism. The incentive and restraint mechanism is the internal driving force for the development of small rural financial institutions. Therefore, it is necessary to establish an effective performance appraisal mechanism, and implement an equity incentive mechanism for senior executives to fully mobilize the enthusiasm of employees, especially senior executives; In terms of internal constraints, an accountability mechanism should be established.
（6） Risk control and innovation of internal control system
