China’s top financial authorities have taken over control of a slew of companies in the finance sector following regulatory breaches.
On 17 July China Banking and Insurance Regulatory Commission (CBIRC) announced that it had taken over a total of six insurance and trust companies, including:
- Tianan Property Insurance (天安财险),
- Huaxia Life Insurance (华夏人寿),
- Tianan Life Insurance (天安人寿),
- Yi’an Property Insurance (易安财险),
- New Times Trust (新时代信托), and
- New China Trust (新华信托).
On the same date the China Securities Regulatory Commission (CSRC) announced that it had taken over three companies for “concealing their actual controllers or shareholding percentages, and imbalance corporate governance.
These companies included:
- New Times Securities (新时代证券),
- Guosen Securities (国盛证券),
- Guosen Futures (国盛期货).
Four of these one companies are reportedly linked to disgraced tycoon Xiao Jianhua, who controlled Inner Mongolia’s Baoshang Bank prior to its takeover by the Chinese government in May 2019. Xiao has since been arrested by authorities.
CBIRC said that it had seized the six trust and insurance companies after they triggered the take-over conditions of the “People’s Republic of China Banking Sector Supervisory Administrative Law” (中华人民共和国银行业监督管理法).
The initial takeover period for these six companies will be from 17 July 2020 to 16 July 2020, during which time the takeover team would be responsible for exercising all functions of the general shareholders assembly, the board of directors and the supervisors board.
A total of six companies will participate in the takeover process, including CPIC, China Life Health Industry Investment, New China Life Insurance, People’s Insurance Company of China, CITIC Trust and Bank of Communications International Trust.
According to CBIRC both New Times Trust and New China Trust will continue to function as normal following the take over, while their credit and debt relations will remain unchanged.
CBIRC took pains to reassure the public of the “overall stability” of China’s trust sector, and said that risk was “completely under control.”
As of the end of the first quarter of 2020 China’s trust sector revenues were 19.1 billion yuan, with accumulated net profits of 12.6 billion yuan.
The net assets of 68 Chinese trust companies was 642.9 billion yuan, for YoY growth of 7.9%, and a net capital coverage ratio of 182%.
CSRC said that aside from corporate governance issues, the three finance companies it took over were “regular in terms of operations, have stable staff teams, and their various operating risk control indicators satisfy regulatory requirements.”
CSRC also published the results of their monthly report from the end of May:
|New Times Securities||Guosen Securities||Guosen Futures|
|Total assets||22.1 billion yuan||30.8 billion yuan||746 million yuan|
|Net assets||9.5 billion yuan||9.8 billion yuan||89 million yuan|
|Net capital||7.1 billion yuan||8.3 billion yuan||71 million yuan|
|Risk coverage ratio||275.50%||370.25%||–|
|Liquidity coverage ratio||1156.08%||366.67%||–|
|Net stable funding ratio||165.22%||183.53%||–|
|Ratio of net capital to total risk capital reserves||272.30%|
|Ratio of current assets to current liabilities||974%|
CSRC said that as of the end of May 2020 the Chinese securities sector had total assets of 7.91 trillion yuan, net assets of 2.1 trillion yuan and net capital of 1.68 trillion yuan.
The risk coverage ratio was 270.45%, the liquidity coverage ratio was 246.50% and the net stable funding ratio was 150.06%.
Total assets of the futures sector were 783.2 billion yuan, while net assets were 122.8 billion yuan and net capital was 67.7 billion yuan.
The net capital to total risk capital reserves were 312%, and the current assets to current liabilities ratio was 640%.