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on september 14, the financial regulatory administration website disclosed two replies:agree to dissolve dongguan dalang dongying rural bank and huizhou zhongkai dongying rural bank due to absorption and merger by dongguan rural commercial bank.

image source: state financial supervision and administration bureau website

a rare case of "village reform and division"

the two replies show that the two village banks should handle dissolution-related matters in strict accordance with relevant laws and regulations. from the date of receipt of the reply, they must immediately cease all business activities, and the shareholders' meeting, board of directors, board of supervisors and senior management must immediately stop exercising their powers, return their financial licenses to the local financial regulatory bureaus, make public dissolution announcements, and go through the cancellation registration process in accordance with the law.

in terms of operating data, taking huizhou zhongkai dongying rural commercial bank as an example, the latest data disclosed by the bank showed that as of the end of 2022, the bank's substandard and doubtful loan scales were 2.9 million yuan and 10.8015 million yuan, respectively, an increase of nearly 1 million yuan and 5.3673 million yuan year-on-year.

the operating conditions of local banks are closely linked to the local economic development situation. a professor at a university's financial research institute told reporters: "the difference between local banks and state-owned banks is that they are more regional. taking some problematic village banks as an example, the key problem is not corporate governance, but the economy of the locations where these village banks are located needs to be activated. most problematic village banks are located in relatively underdeveloped areas. if the 'soil' is not good, the trees that rely on it will not be able to have a good living environment."

it is worth mentioning that although both of these village banks were dissolved due to merger, huizhou zhongkai dongying village bank will establish the huizhou branch of dongguan rural commercial bank after merger. this is also a rare case in china where a rural commercial bank merged a village bank and converted it into a branch.

on june 20, the guangdong regulatory bureau of the state financial regulatory administration disclosed an approval letter, agreeing to dongguan rural commercial bank's absorption and merger with huizhou zhongkai dongying rural commercial bank, taking over its claims and debts after liquidation and asset verification, and establishing dongguan rural commercial bank huizhou branch.

on the same day, another reply released by the guangdong financial regulatory bureau indicated that it agreed to dongguan rural commercial bank's absorption and merger with dongguan dalang dongying rural bank co., ltd., and to take over its claims and debts after liquidation and verification of assets. the reply required that dongguan rural commercial bank should strictly follow the relevant laws and regulations to handle the preparations for the absorption and merger, and urge dongguan dalang dongying rural bank co., ltd. to complete the dissolution of the legal entity.

steadily promote reform and mitigate risks

why the merger? dongguan rural commercial bank mentioned the reason in the announcement disclosed on september 14. the announcement on the system switch and business change of dongguan dalang dongying rural bank disclosed on the bank's website shows that "in order to further integrate the group's operating resources and better provide financial services to customers." in addition, the announcement shows that in order to successfully complete the institutional merger, dongguan dalang dongying rural bank will conduct a system switch from 17:00 on september 14, 2024 to 09:00 on september 18, 2024.

since early june this year, about 50 small and medium-sized rural banks have been absorbed, merged or dissolved.two village banks in zhoushan, zhejiang were dissolved due to their absorption and merger by chouzhou bank, and were both converted into branches of chouzhou bank; meihekou minsheng village bank was acquired by minsheng bank and converted into a branch; liaoning rural commercial bank absorbed and merged 36 rural small and medium-sized banks...

experts said that "village to branch" or "village to branch" can directly bring the village bank business under the management of the main initiator bank, help enhance service capabilities, and more efficiently promote reform and risk reduction. it is a realistic option for smaller, operationally difficult urban commercial banks, rural credit institutions and village banks.

in january this year, the financial regulatory administration mentioned in its 2023 work review that the restructuring of village banks has been fully launched.

"for small and medium-sized banks with higher risks, on the one hand, we implement high-intensity supervision to gradually reduce their risks. at the same time, we work with local party committees, governments and relevant departments to formulate a 'bank-by-bank, one-policy' approach to implement reforms and reduce risks as well as corresponding measures." xiao yuanqi, deputy director of the financial regulatory administration, said that overall, multiple measures are being taken to safely and orderly resolve and deal with existing risks and strictly control incremental risks.