Tagged: Internet platforms

It is a big problem that the asset side cannot be invested

Small and medium banks have changed their liabilities

In fact, the development of deposit products on Internet platforms by some small and medium banks has indeed made up for the problem of insufficient deposits. From the data point of view, after absorbing deposits through the Internet platform, the deposit scale of some small and medium banks has increased rapidly, and the deposit scale of some of the above-mentioned small and medium banks has soared.

A reporter from China Business News found that at the end of 2019, the scale of customer deposits of Huatong Bank was about 7.077 billion yuan, while its customer deposits at the end of 2018 were only about 1.436 billion yuan; the balance of personal time savings deposits of Huarui Bank at the end of 2019 was about 60.61 100 million yuan, only 88.313 million yuan in 2018.

However, the increase in the scale of deposits will also bring corresponding risks. Sun Tianqi pointed out that small and medium-sized banks will inevitably pursue high-yield assets and match high-risk projects, leading to increased asset-side risks.

“Because the cost is too high, only a small number of banks with a relatively weak customer base, fewer branches, and the impulse to develop quickly will use this method.” Zeng Gang, deputy director of the National Finance and Development Laboratory pointed out. In the long run, excessive dependence on Internet deposits is not conducive to the development of banks. In the short term, rapid expansion of scale through this method will result in higher capital costs and high risk of asset preference, which is not conducive to the steady operation of banks.

In addition, Internet platforms have high sensitivity to deposit interest rates, low customer stickiness, and deposit stability far lower than offline outlets.

“The customer recognizes the platform, not the bank, which means that if other banks have higher returns on this platform, the deposits may be transferred to other banks. Therefore, this type of deposit does not have savings deposits as core deposits. Zeng Gang said that the short-term expansion of Internet deposits actually accumulates a lot of liquidity risks. If large-scale deposit relocation occurs on the Internet, it may affect the long-term stability of the bank.

It is a big problem that the asset side cannot be invested

At present, the removal of Internet deposit products has little effect on ordinary users who have already handled related businesses, and they can still operate in accordance with the normal process. However, users who have not handled related services can no longer use such services.

From the perspective of the cooperation model, some small and medium-sized banks collect deposits on the Internet platform at high interest rates and pay a “diversion fee” to the platform. Generally, banks pay the platform based on two to three thousandths of the average daily deposit balance of the platform. Fees are settled monthly or quarterly.

After the removal of Internet deposit products, what impact will it have on relevant small and medium banks and Internet platforms?

On the whole, although deposit products launched by internet financial platforms have facilitated consumers to enjoy deposit services, internet deposits are not a sustainable development model. The customer stickiness brought by such products to banks is not high. Although in the short term, the strengthening of supervision will restrict the development of these banks, in the long run, it is conducive to the steady and sustainable operation of the banks.

Wang Yifeng believes that Internet deposit products exist as a third-party platform’s product system. After the third-party platform is removed, there will be no longer-term products on the third-party platform, which will have some impact on the richness of product shelves. However, customer stickiness has not disappeared, and third-party platforms may not be subject to too much impact. For individual banks, banks with low market recognition and weak customer base systems will indeed be greatly affected, and their development speed will slow down, but they can Reducing the bank’s own operating risks will help control the cost of liabilities, stabilize funds, and reduce liquidity risks.

Zeng Gang suggested that such small and medium-sized banks should correct their development concepts and explore long-term and sustainable growth paths under the existing financial framework. They should reduce their scale preference and consolidate their customer base, and improve their comprehensive income through diversified services. , Improve customer stickiness.

“At present, some banks are high interest rates for deposits, but whether the asset side can be used out is a big problem. If the asset side does not have a corresponding good return, it will have a negative impact on the profitability of the bank. In fact, most small and medium-sized Banks are unable to invest if they have a lot of money. Some banks have begun to actively reduce the scale of medium and long-term deposits.” Zeng Gang said.

Internet deposits are completely removed overnight

In recent days, popular Internet deposit products have been removed from the shelves of major Internet platforms one after another, which is regarded by the market as a further rectification of the Internet financial chaos by the central bank.

In the past two years, many banks have launched deposit products on Internet financial platforms to increase deposit solicitation and broaden customer acquisition channels. However, the corresponding risks have also aroused the vigilance of regulatory authorities.

In two public speeches in November and December, Sun Tianqi, director of the Financial Stability Bureau of the People’s Bank of China, named Internet deposit risks. On November 7, Sun Tianqi disclosed that the total of 11 banks currently displayed on the head platform involved more than 50 banks with deposits on sale, most of which were small and medium-sized banks. The deposit amount of a single account is mostly below 500,000 yuan (inclusive). “Some small and medium-sized banks only opened the Internet platform deposit business in April this year. They have absorbed more than 20 billion yuan in deposits in just a few months, and the proportion of their deposits has rapidly risen to 25%. A bank has absorbed total deposits through the Internet platform. It even accounts for 70% of its deposits.”

Regarding this round of platform delisting of related deposit products, CBN reporters learned that most of them were “active” actions of Internet platforms, and the platform has not yet received window guidance or regulatory notices from regulatory authorities.

At the same time, all parties are paying attention to what impact will the product have on banks, investors, and third-party Internet platforms?

All products are removed

As of press time, Internet financial platforms such as Alipay, Tencent Licaitong, Duxiaoman Finance, JD Finance, Lufax, Didi Finance, and Ctrip Finance APP have all removed Internet deposit products.

The issuance model of Internet deposit products is actually not complicated. Banks sell deposit products through third-party Internet financial platforms. Products and services are provided by banks. The platform provides information display and purchase interfaces for deposit products (the relationship between creditor’s rights and debts is between depositors and banks).

The deposit products sold through the platform are all personal time deposits, mainly with 3-year and 5-year maturities. The highest interest rate for 3-year maturity is 4.125%, and the highest for 5-year maturity is 4.875%, which are close to or reach the upper limit of the national self-regulatory pricing mechanism . Nearly half of the products have an initial deposit of only RMB 50, and they can be withdrawn at any time in advance.

From the perspective of the types of banks displayed on the platform, most of them are small and medium-sized banks, such as Beijing Zhongguancun Bank, Zhenxing Bank, Huatong Bank, Huarui Bank, Jincheng Bank, Yingkou Coastal Bank, etc.

A few days ago, the Ant Group stated that in accordance with regulatory requirements for the Internet deposit industry, Ant currently takes the initiative to remove all Internet deposit products on the platform, which are only visible to users who have purchased the product, and users who hold the product will not be affected.

Since then, many Internet platforms such as JD.com and Baidu have successively removed all Internet deposit products. According to JD Finance, currently, in accordance with the regulatory authorities’ attention to the Internet deposit business, the JD Finance APP has stopped adding new online deposit products, stopping new users from purchasing related products, and has made steady and orderly adjustments to existing customers and businesses: related The product will only be visible to users who have purchased the product, and users who have purchased the related product will not be affected. In the future, JD Finance will pay close attention to relevant regulatory policies and guidance and implement them in earnest.

Du Xiaoman said that he would strictly abide by relevant policies, regulations and regulatory requirements, embrace supervision, and insist on operating in compliance. For the Internet deposit business, the Internet deposit products on the platform are currently removed. After the product is removed, it will only be visible to users who have purchased the product, and users who have purchased related products will not be affected. In the future, related businesses will be continuously improved in accordance with the requirements of regulatory policies.

Breaking through geographical restrictions, disrupting the deposit interest rate market mechanism, pushing up the cost of debt, and increasing risks on the asset side have become the fundamental reason for this round of Internet deposit rectification.

For example, most Internet platforms display the deposit products of various banks with high and low interest rates. The high interest rates are ranked first, which leads to differences in traffic and intensifies the behavior of inter-bank bidding for deposits.

Wang Yifeng, chief banking analyst at Everbright Securities Research Institute, said that the bidding model has pushed up the debt costs of many small and medium-sized banks, causing small and medium-sized banks to be forced to develop high-risk businesses. In addition to liquidity risks, credit risk pressure has also increased to a certain extent. .

In addition, this business has also broken through the geographical restrictions of outlets, and some small and medium banks have realized cross-regional operations. In the above speech, Sun Tianqi listed a series of problems with deposits on Internet platforms.

For example, some high-risk banks use seemingly stable and unstable funding sources to maintain their high-risk asset operations, further exacerbating their own risks. At the same time, the cross-regional nature of platform deposits increases risk spillovers and increases the difficulty of disposal. In addition, some small and medium-sized banks collect deposits on Internet platforms at high interest rates and pay “diversion fees” to the platform, further increasing their liabilities. End the cost of capital, which will stimulate banks to seek high-yield assets and invest funds in high-risk areas. In the long run, the asset quality of small and medium-sized banks that are highly dependent on Internet platform deposits will also face tests and so on.