Opportunities and challenges facing the opening of private banks

These two days, the news about the pilot of private banks is overwhelming. The source of the news is that March 11, the chairman of the Banking Regulatory Commission, Shang Fulin, said at the two conferences, has now identified 5 private banking pilot program, and reported that the State Council agreed to participate in the pilot enterprises, including Alibaba, Tencent and other domestic private capital giants. The news, immediately sparked public opinion, some analysts believe that this marks the spring of private banks is coming. But do private banks really have a bright future?

In 2013, the State Council issued a financial "country 10" has made it clear that "will try to start by private capital to set up the risk of private banks and other financial institutions." Since then, the topic of private banks has been abuzz. According to incomplete statistics, the names of 67 private banks were pre-approved in 2013.

For many years, private capital has been chasing after the privately owned bank. This is especially urgent when the macro-economic situation declines or private-sector financing tightens. Because under the strict financial control, the Chinese banking industry is relatively concentrated, the asset scale is huge, the gross profit is rich, is regarded as "tang" by the folk capital.

In fact, in recent years, private capital investment in the banking industry has been very common. Take the private economy big province Zhejiang as an example, the private capital shareholding already accounted for the province local legal person banking financial institution 3/4, the Zhejiang Merchant Bank's 24 shareholder most is the private enterprise, including the Zhejiang Tyrone Commercial Bank and so on 40 local legal person banking financial institutions is 100% private capital shareholding. Country-wide village banks have also been more than thousands of private capital direct and indirect shareholding as high as 70%.

However, there is still a big gap between these private-owned financial institutions and the real private banks. Dong Xi, guest researcher of the Institute of Finance, Renmin University of China, the real private bank should have three characteristics: from the view of the ownership structure, the main shareholder is the private enterprise and the natural person, and the private capital occupies the holding position; from the view of the asset organization, it mainly provides financial support and service for private enterprises and individual clients; from the view of governance structure, Initiated by private enterprises and operated independently by market mechanism. In short, it is the "three people": people, private enterprises, privately owned.

In order to achieve the above "three people", private banks also need two important policy support: one is the real interest rate marketization, mainly is the deposit interest rate marketization, this will be the private bank's independent management to lay the important foundation; the second is the deposit insurance system, which will make the private bank gain more public trust, also helps to protect the depositors ' interests. Without these two policies, it is unlikely that private banks would be spread out on a large scale.

The biggest challenge facing private banks is how to deal with China's rigid traditional financial system. Since the reform and opening-up, China's financial industry has made great achievements both in the system reform and in the internal structure management of financial enterprises. However, because of the whole financial system such as interest rate regulation, financial capital allocation control, and the non-market choice of senior managers of finance enterprises, they have not completely deviated from the planned economy. The direct consequence is that the allocation of financial capital resources is grossly unfair, the allocation efficiency is very low, and the configuration risk is very great.

If China's traditional financial system does not carry out thorough reform, then for the capital demand side, the establishment of private banks, at best, only a more financing channels, the value of private banks greatly discounted. Only the financial system reform to a certain extent, the price signal can really reflect the market supply and demand relations, only then the real private banks can appear.

On the other hand, if the financial system carries out market-oriented reform, it will make some small and medium-sized banks face enormous survival and development pressure. The private capital holder may not be familiar with the operation of the bank, and it is less experienced in risk control. Therefore, the weak private banks will face huge market risks.

From participating in the first private banks of the pilot enterprises, Alibaba, Tencent and so on itself has already been involved in the operation of the internet finance, Ali small loans, Alipay, balance treasure, micro-letter payment has been done well, let them accumulate a lot of financial operation experience. If these private banks can perfectly combine with internet finance, it will help to get rid of the defects of the existing financial system and even become the breakthrough of financial system reform, bringing a bright spring to the whole Chinese financial industry.