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The Proliferation of Intangible Financial Risks and Countermeasures
2017-05-16
By Xu Pengcheng, DRC
2017-03-27
Under the new normal of economic development, the economic growth, structure and mode have all experienced some changes. With the looming up of some irregular performance in the financial sector, various kinds of intangible risks have become tangible. As a result, one of the major issues for us is how to prevent the intangible risks from evolving into systemic risks .
At present, intangible financial risks bear some new features. 1. Due to the impact of slow economic growth and investment slump, the quality of banks’ credit assets is decreasing. 2. The banks use technical measures to adjust loan classification, making the actual non-performing loans far exceed the record on banks’ books. 3. With the swift reduction of overcapacity, the overcapacity will continue to give rise to a large amount of bad loans. 4. The local debt risks remain serious, and they might affect the central fiscal performance. 5. Internet financial risks are becoming larger, which might spill over to other fields at any time.
With regard to the resolution of current intangible financial risks, this paper puts forward the following policy options. 1. We need to bring into play the guiding role of financial policies and enhance financial supervision. 2. We need to flesh out rules and regulations relating to Internet finance in line with national legislation. 3. We need to establish a hierarchical early-warning mechanism over financial risks in those areas where financial risks are relatively tangible so as to prevent the spill-over effect of risks from happening. 4. We need to make a clear distinction between the fiscal and financial functions to avoid the fiscal risks brimming over to financial sectors. 5. We need to strengthen debt ceiling management over local debts to keep off the risks. 6. We need to establish a diversified financing system to reduce banks’ credit risks. 7. We need to enforce measures to prevent the risks of cross-sector operation in the course of financial innovations. 8. We need to quicken the pace of cutting overcapacity, and enhance the work relating to enterprise bankruptcy and reorganization.
