The worst is over for the big bank or the loan crisis

Liu Xiaodong Li Guanyun for US banks in the heart of the global financial turmoil, what is the point of the government setting off a stress test that covers 19 banks? Why do some commercial banks that have passed stress tests choose to finance the capital markets to repay previous U.S. government injections?　　Are the worst moments over for them?　　With the above questions, May 16 Afternoon, our reporter interviewed the 2009 Lujiazui Forum in Shanghai, Vice chairman of New York Mellon Bank, President and CEO Ronald Auhanli of Asset Management department (Ronald O ' Hanley). As the largest bond custodian in the United States, the bank managed assets of New York Mellon amounted to $19.5 trillion trillion at the end of the first quarter of this year, with a total of $881 billion trillion in managed assets other than securities and credit assets.　　The bank is one of the banks involved in the US government's Troubled Asset Relief Program (TARP), which injected 2 billion of billions of dollars into the U.S. government last October and secured its toxic assets. Auhanli said the financial sector has begun to recover, although the business environment in the US is still bad.　　"Libor has now fallen very low, and spreads between federal and bank lending rates are narrowing, as a sign of a banking recovery," he said.　　American banks are not as bad as they think. 21st Century: Many economists question the accuracy of the results of the US banking stress test. Auhanli: Our bank has passed the stress tests, and I think it shows that the results of this stress test are accurate. This not only tests the bank's capital adequacy ratio, but also tests the banks ' ability to use the money to make a profit. Combining these two indicators, the test is accurate.　　Markets have reacted to the test results, and many banking stocks have started to rebound.　　"21st century": what is the real situation in the US banking industry now? Auhanli: America's banking sector is in the middle of a recovery. For the big banks, the worst is over, but that doesn't mean there will be no new problems in the future. It's important to note that the stress tests are mostly big banks, and the real problem is in the small and medium-sized banks.　　They will be in big trouble because the quality of their loans is not very high, and now the economy is in recession, non-performing loan rate is bound to rise significantly, which will be a big blow to small and medium-sized banks.　　"21st century": What are the "big troubles" of small and medium banks? Auhanli: In a recession, the risk that individuals and businesses cannot repay their loans increases. That would make the balance sheets of small and medium-sized banks much more stressful, and non-performing loans would rise as economies in the US and other countries continued to decline.　　The crisis we have had was mainly focused on the securities sector, and I think the banking sector may soon face a loan crisis and the loan problem is just beginning.　　"21st century": What do you think of the recent trends in U.S. financial industry? Auhanli: The global economyThe crisis, first of all, is a crisis in the financial sector, which then spreads to the real economy, leading to a global recession, and I think the financial sector will lead the economy out of recession. From the point of view of the crisis, it is not surprising that the financial sector was first to recover before the real economy recovered.　　There is still a long way to go before the U.S. economy recovers, and the unemployment rate is high and the financial sector is better off than the real economy. 21st Century: Does the US government conduct a banking stress test to tell the public about the real situation of some big banks and dispel public panic?　　Does it mean that the Government will continue to take action against some of the banks in question? Auhanli: Yes, the stress tests are first and foremost to ascertain whether the capital adequacy ratios of each bank are met. Second, it also wants to make the public see that some banks ' capital adequacy ratios are not as bad as they think, to allay investors ' fears of market uncertainty.　　The problem now is that the public has lost confidence in the entire banking sector, that all banks have serious problems, and that the government's banking stress test is to identify the problematic banks with well-run banks and inject confidence into the public.　　Ensuring the transparency of financial institutions ' 21st century: is the business model of your bank The main reason for being immune to the strong impact of the financial crisis? Auhanli: The rise in non-performing loan rates will bring many problems.　　Fortunately, we are not a typical traditional bank, we mainly engaged in securities services and asset Management two major business, the two business is through the collection of services to profit, our balance sheet loans are not much, we will not suffer from the loss of non-performing loans.　　We are very sensitive to the market level, when the market is not good, our service costs will naturally decline, but we do not appear to operate the loan business will face the basic loss (principle lost).　　21st Century: What do you suggest that some financial institutions in China are increasingly developing proprietary businesses? Auhanli: My advice is to ensure that the risks of financial institutions are transparent and that regulators focus on the quality of corporate risk management.　　If some financial institutions do not pass the risk control, regulators should let them stop those high-risk businesses.　　"21st century": in the global financial crisis, many foreign investors are evacuating emerging markets, why do you still increase their business in China at this time? Auhanli: We think about it in the long run.　　The expansion of our business in China is due to our belief that China's economy will continue to grow over the long term, and that the demand for securities services and asset management will inevitably rise in the process.　　21st Century: Recently, your company and Goldman Sachs have been financing the market to repay the loans previously provided by the Government. Auhanli: There are three main reasons. First, the interest on loans provided by the Government is very high, and we can now get lower interest funds to reduce the cost of financing. Second, we do not need the government to provide this loan, the government can use these funds for those who needPeople.　　Third, government loans are collateral clauses and we do not want to be unduly restrictive.　　21st Century: Is the ability to finance government loans on the market mean that the crisis is over for some banks? Auhanli: I think the crisis has passed, although the business environment is still bad. The financial sector has begun to recover, Libor has fallen very low, and the spreads between federal and bank lending rates are narrowing, as signs of a banking recovery. Both we and Goldman have been able to raise money from the market, and Citigroup also raised money yesterday, as the securities market has started to recover.