Market News International:
How will you prevent the credit risk of small and micro enterprises and reduce the risk premium of banks when providing loans to micro, small and medium-sized enterprises (MSMEs)? Thank you.
Xiao Yuanqi:
Thank you for the question. Risk prevention has always been the bottom line of our supervision. The temporary arrangements we are adopting are not standards for deregulation; rather they are just a means to prevent risk. As I just mentioned, banks must help micro, small and medium-sized enterprises ease tension in their capital chain caused by the epidemic, so they can resume normal operations and production in an orderly manner. In fact, banks are preventing their own risks by doing this, because with their help, the high-quality clients will not turn into bad clients, and loans to these enterprises will not turn into bad loans.
In addition, banks should follow their original risk control standards and regulatory requirements when offering financial services to these enterprises. For example, we must not aid enterprises that did not operate normally before the epidemic. Therefore, we require banks to distinguish between enterprises struggling due to the epidemic and those that suffer from unrelated causes. For those enterprises who experience business failure due to their own causes, banks must include their loans into the list of non-performing loans based on risk classification. However, strong support must be given to those that are facing operation difficulties due to temporary impacts of the outbreak. Thank you.
Liu Guoqiang:
I totally agree. The relationship between banks and enterprises is market-oriented and is a process of mutual selection. Our measures do not mean that enterprises that do not meet the requirements can also get loans. In addition, I want to add one point which is about the relationship between the finance sector and the real economy. The real economy is the foundation. Now many brick-and-mortar enterprises are facing temporary difficulties. If banks give them a hand, their performance will get better, if not, their business may get worse and even collapse. Most of the non-performing assets of banks are attributed to corporate closures. If these brick-and-mortar enterprises go out of business, then they can't pay their existing loans. So, banks should provide support for these firms. From the macro perspective, improving economic and financial circulation is good for reducing the non-performing assets of the banking industry.
Hu Kaihong:
Time is limited, so now for the last two questions please.
