Officials of the CBRC Answered Questions from the Press on Guidelines on the Management of Collaterals for Commercial Banks


Recently, the CBRC issued the Guidelines on the Management of Collaterals for Commercial Banks (hereinafter referred to as the "Guidelines") to guide commercial banks in standardizing collaterals management and effectively preventing and mitigating credit risks. Officials of the CBRC Took Questions from the Press on the Guidelines.


I. What is the background for issuing the Guidelines?


Collaterals are the significant method for commercial banks to mitigate credit risks, and the CBRC attaches great importance to guarding against credit risks by taking advantage of the risk mitigation effect of collaterals by commercial banks. At present, the systems, procedures and risk management of collateral management of some commercial banks need to be further improved, and the risk mitigation role of the collaterals should be given full play.  The Guidelines by the CBRC incorporates the management of collaterals into banks’ overall risk management and guides commercial banks to strengthen collaterals management and improve credit risk management through relevant systemic arrangement.


II. What principles should be followed to strengthen the management of collaterals?


Collaterals management of commercial banks should follow the principles of compliance, validity, prudence and subordination. It is necessary to strengthen the management of collaterals and ensure that collaterals can effectively secure banks’ rights as creditors; meanwhile, banks should take full account of collaterals’ own risks and prudently formulate policies of collateral management, and assess the value of collaterals and risk mitigation effect of collaterals. Additionally, commercial banks should make full assessment of debtor’s solvency capacity first when issuing pledge loans in order to avoid excessive reliance on collaterals and neglect the first source of repayment.


III. What are the main contents and requirements of the Guidelines?


The Guidelines comprise seven chapters and 48 articles, and supervise and guide commercial banks to strengthen the management of collaterals from the following three aspects. Firstly, improving the management system of collaterals, including strengthening the development of collateral-related systems, clarifying job responsibilities, and improving information systems. Secondly, standardizing collateral management business processes, including standardizing collateral survey and assessment, setting of pledge, maturity management, return of collaterals, and other business procedures. Thirdly, strengthening risk management of collaterals. The Guidelines put forward specific requirements on the collateral classification, valuation, concentration management, and stress testing.


IV. How should commercial banks implement the requirements in the Guidelines?


Commercial banks should investigate into the existing problems of collateral management according to the requirements in the Guidelines and develop a work plan to rectify problems, improve the management system, standardize management business processes, and strengthen risk management in order to improve the management standard of collaterals. At the same time, the risk mitigation effect of collaterals by commercial banks should be attached great importance in credit management while avoiding excessive reliance on collaterals and neglect of the estimation of customer’s cash flows. It will also guide commercial banks to balance the relationship between secured loans and credit loans when issuing credit loans and providing good financial service for the real economy, especially for the development of the micro and small enterprises.





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