Study On The Differentiated Supervisory Mechanism For Liquidity Risk Of Rural Banks

Rural areas have long suffered from backward market economic awareness and insufficient demand,resulting in the slow development,lack of services and weak supply of rural financial institutions.With the steady progress of urbanization,the problem of urban-rural polarization has become increasingly serious,intensifying the potential contradiction between supply and demand in the financial system in rural areas.Financial institutions that originally supported the supply of financial services in rural areas have gradually withdrawn from this financial service sector due to high input costs,high operational risks,limited profit margins and inability to adapt to the development needs of the "three rural areas".In order to alleviate the imbalance between financial supply and credit demand in rural areas and to solve the "three rural issues",village banks have replaced traditional rural financial institutions such as agricultural banks,savings banks and rural credit cooperatives that originally served the rural economy,filling the gap in the supply side of rural finance.As highly leveraged,highly indebted banking institutions,village banks are exposed to various financial risks when participating in market operations,and liquidity risk is the most direct and deadly risk faced by village banks,which not only directly leads to a run on the bank,but also indirectly causes other risks such as credit risk,reputation risk and operational risk.Compared with other large commercial banks with strong capital,village banks,as a special type of commercial bank at the end of the financial system and mainly serving rural SMEs,face greater liquidity risk potential.This paper examines the "difficulty of withdrawing money from village banks in Henan" in April 2022.This paper discusses the special risk characteristics of village banks in comparison with other commercial banks,focusing on the causes of liquidity risk and the shortcomings of the legal regulatory mechanism for liquidity risk supervision,mainly in the following aspects: First,the concept of risk supervision is lagging behind,and village Although there are relevant laws on the control of liquidity risk in China’s village banks,they are generally scattered and divided into different categories,lacking targeted regulatory provisions that are appropriate for liquidity risk;thirdly,the regulatory approach is rigid.The supervision of village banks has not yet established a scientific and complete comprehensive evaluation system,and can only rely on fixed indicators,such as the net stable capital ratio and the deposit to loan ratio on quarterly statements,but these indicators can only reflect the liquidity of assets at special points in time,such as at the end of the quarter or the end of the year,and cannot provide real-time tracking of various data indicators in the daily operation of village banks.Based on the above analysis,this paper proposes the following legal regulation recommendations.Firstly,in terms of regulatory philosophy,a "three-in-one" penetrating regulation of the shareholding structure of village banks should be established to enhance the transparency of corporate governance.In addition,the concept of "suitability" should be adopted to regulate the liquidity risk of village banks,and a differentiated regulatory system different from that of traditional commercial banks should be established to reduce the compliance costs to be borne by village banks.Secondly,at the level of internal risk control,the system of promoters and equity participation in village banks should be optimized to improve the internal governance structure,while at the same time enhancing the enthusiasm of other shareholders,such as agricultural-related enterprises and microfinance organizations,in addition to the main promoter bank,to participate in the governance of village banks,and implementing a diversified promoter system.Thirdly,in terms of risk supervision,firstly,the "three checks" system for loans should be implemented to prevent them from carrying out entrusted loans,trust loans and other channel businesses for regulatory arbitrage,and to reduce irregularities in lending by village banks.Secondly,we should improve the means of restraint for village banks in the actual implementation of the deposit insurance system,so as to prevent village banks from using the system to transfer the high risks of their own operations to deposit insurance institutions,thus leading to moral hazard evolving into liquidity risk for village banks.Again,a differentiated information disclosure system for village banks should be constructed,drawing on the US disclosure regulations for community banks to refine them in terms of the timing of disclosure settings,content control and legal consequences.Lastly,the whole process of supervision mechanism for liquidity risk of village banks should be improved,including liquidity risk early warning mechanism and market exit mechanism.The liquidity risk early warning mechanism is the first line of defense for ex ante supervision,and should provide for real-time monitoring and trend analysis of indicators.The market exit mechanism is the last line of defense to promote the structural reform and restructuring of village banks and to resolve liquidity risks.