This year’s Central Economic Work Conference proposed that “strengthening anti-monopoly and preventing the disorderly expansion of capital” is one of the key tasks to be grasped next year. It is necessary to strengthen regulation, enhance supervision capabilities, and resolutely oppose monopoly and unfair competition. Financial innovation must be carried out under the premise of prudential supervision. This has once again aroused the market’s attention and discussion on the new “big to fail” risk.
On December 8, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, stated at the Singapore Fintech Festival that he should pay attention to the new type of “big not to fail” risks. A few technology companies occupy a dominant position in the micropayment market, involve the interests of the general public, and have the characteristics of an important financial infrastructure. Some large-scale technology companies are involved in various financial and technological fields, and cross-border mixed operations. We must pay attention to the complexity and spillover of these institutional risks, timely and accurate bomb disposal, and eliminate new systemic risks.
So, where is the new type of “big to fail” risk?
What kind of signal does the emphasis on new risks send at this time?
What kind of pattern will financial supervision take in the future?
Recently, a reporter from the “Financial Times” interviewed relevant experts in order to provide an in-depth interpretation of the new “big to fail” risk.
Where is the “new” risk of the new type “big to fail”
“Big to fail” was originally a risk phenomenon for banking financial institutions. Nowadays, some large technology companies and a few technology companies with important financial infrastructure characteristics are also facing a very similar situation, which is called the new type of “big And can’t fall” risk.
“The new type of’big to fail’ risk has emerged with changes in economic and financial forms. We have seen that with the acceleration of economic and financial digitalization, new forms of financial activities and new types of financial infrastructure have been derived.” National Finance Zeng Gang, the deputy director of the Laboratory and Development Laboratory, believes that the “new type” is mainly reflected in the fact that technology companies are not typical traditional licensed financial institutions, but at the practical level, they are engaged in the business of traditional financial institutions. The function of infrastructure is also widely and deeply related to other financial institutions in the business field, and there are new hidden systemic risks.
“In the field of micropayments, a few technology company platforms have a very high market share, are involved in various financial scenarios, involve the interests of the general public, and have important financial infrastructure characteristics. If there is a problem with these financial infrastructures, the operation of the trading system Stability will be greatly disturbed, which will affect the stability of the entire economy and finance.” said Wang Yifeng, chief analyst of the banking industry at Everbright Securities Research Institute.
The data shows that the micropayment market represented by mobile payment is developing rapidly. According to the data disclosed by the Central Bank, in the third quarter of 2020, non-bank payment institutions processed 1,234.45 billion online payment transactions, with an amount of 78.96 trillion yuan, an increase of 22.65% and 23.38% year-on-year respectively; the online platform processing business (through online payment initiated by payment institutions) The online payment business involving bank accounts processed by the Lian platform was 156.122 billion, with an amount of 97.21 trillion yuan, an increase of 43.82% and 40.87% year-on-year respectively.
The risks, complexity and spillovers of some large technology companies’ cross-border mixed operations are more prominent. “Some financial technology companies make joint loans with banking institutions, and a large number of assets are turned into ABS and put on the market. When the scale is small or there are not many counterparties, the systemic risk is not yet prominent, but once the scale increases, the risk The scope of transmission is likely to affect the operation of other financial institutions.” Zeng Gang emphasized.
Take Ant Company as an example. The information disclosed in its prospectus shows that Ant Company has a total credit scale of 2.1 trillion yuan, 98% of which comes from cooperative banks and ABS.
Wang Yifeng believes that financial technology giants are typical platform-based companies with network effects and scale effects. By dismantling financial businesses, they can achieve actual mixed operations and provide cross-cutting financial products, which may intensify cross-market contagion of financial risks. At the same time, large technology companies, as platform intermediaries, rely on scenario advantages to master traffic distribution and form strong bargaining power over financial institutions. This objectively causes financial institutions to rely on technology giants in terms of traffic introduction, customer management, and risk control. .