Chapter 968 Explanation
"Risk? What risks are there? The main body of this project will be centered on trusts and current credit unions, with equity involvement from other banks. In addition, Yanjing has also obtained approval, plus the relationships and channels with the local government, how come I don't see any risks?" Shao Heping asked in confusion.
"Brother Shao, this is exactly why it is risky!" Song Chaoyuan shook his head when he saw that Shao Heping still didn't understand. In fact, he was optimistic about this project at first, just like Shao Heping. But after the professional team from Xiangjiang arrived, they conducted a detailed analysis of the project. In addition to the discussions in recent days and contacts through other channels behind the discussions, Shenghua finally came to a conclusion opposite to the original one. This conclusion surprised Song Chaoyuan when he heard it for the first time, but after the detailed explanation of the professionals and Song Chaoyuan's own judgment, he finally admitted that the conclusion of the professional team was correct.
Song Chaoyuan is a businessman and Shao Heping is an official. Compared with Song Yuanchao, Shao Heping is less acumen in business. Song Yuanchao only understood it after the explanation and analysis of a professional team, so it is normal that Shao Heping could not see the problem with this project for a while.
Song Chaoyuan explained to Shao Heping bit by bit, explaining the risks of this project in a way that the other party could understand.
Although what Shao Heping said was correct, the establishment of Qiongdao Commercial Development Bank was a good thing on the surface, and the main structure and core parts of this bank were formed by the merger of previous trust institutions and credit unions, and then there was capital investment from major banks, plus the approval from Yanjing, so there was no problem from any aspect.
Moreover, in capital operations, through this kind of financial means to carry out restructuring, the entire Qiongdao's projects and industries after the real estate bubble burst were packaged as assets and injected, thereby sharing debts, concentrating funds to do big things and solve problems. From this perspective, it is also very normal.
From the proposal of this idea to its subsequent operation, coupled with the support of local governments, it is a good thing no matter how you look at it.
Unfortunately, after learning about the specific situation, Shenghua's professional team came to the opposite conclusion. The team unanimously believed that the risk of this project was too great and that the project had inherent flaws from the beginning. In addition, the actual capital invested by the various shareholders was not real money in essence, and very little actual money was taken out. On the contrary, the ratio of converting previous debt into equity was too high. In addition, the high debt problem of the current shareholders, including the banks themselves, has not been resolved, which poses a huge hidden danger.
"Brother Shao, come and look. If we compare this to the current credit unions on Qiongdao Island, this is a trust, these are the major banks, plus other shareholders besides these, that is, if Shenghua intervenes, they will be similar to Shenghua's investors. These are the basis for the development of the bank..." Song Chaoyuan picked up several tea cups in front of him and placed them, explaining to Shao Heping in a more figurative way.
Shao Heping looked at the teacups placed there and nodded slightly, but he still didn't understand what the problem Song Yuanchao was talking about was.
Song Chaoyuan told Shao Heping that according to the current bank debt after the real estate bubble burst, the highest is about 60%, and the lowest is nearly 40% to 50%, and these are only the bank debts. As for the debts of credit unions and trusts, they are even higher. After all, compared with banks, both credit unions and trusts are not as well-established as banks. Such a high debt ratio has already made credit unions and trusts breathless. Therefore, although they are shareholders in the process of establishing the development bank, they can't take out any funds at all. All they have is the organization of the credit union or trust, plus the equity converted from liabilities.
In fact, the same is true for banks. It is impossible for the head office to fully guarantee the liabilities of local banks. Moreover, during the previous Qiongdao real estate bubble, multiple pledge violations were common. As a result, local banks need to resolve their own liabilities. In addition, the local banks' debt conversion and real equity investment are both important, with the former also accounting for the majority. This poses a very serious problem for a newly established commercial bank from the outset.
According to the calculations of Shenghua's team, once the Commercial Development Bank was established, it had a complete organizational structure and looked like a large commercial bank. But in fact, from the beginning of its establishment, the bank was operating with debt. According to conservative estimates, the bank's debt ratio was frighteningly high on the day it was established, but it did not have sufficient funds.
"What debt ratio are you referring to?" Shao Heping asked with a serious look.
"The exact amount has not been calculated yet. It depends on the final equity situation, but there is a rough estimate based on the current liabilities and the amounts under discussion. I think the number is at least over 3 billion, or even more," Song Chaoyuan answered frankly.
"So many? Could this number be wrong?" Shao Heping was shocked and asked hurriedly.
"Brother Shao, you are the person in charge of Lucheng. I think you should know how much debt Lucheng is involved in with various banks, trusts and credit unions. Moreover, this bank is related to the debt problem . So don't you know how big these debts are added together? Three billion, I am still conservative, it may double if things go wrong."
Song Yuanchao's words left Shao Heping speechless. Shao Heping was of course well aware of the mess left behind by the bursting of the real estate bubble on Qiongdao Island. The funds involved in all aspects of the entire Qiongdao Island due to the bursting of the real estate bubble were not just 3 billion, but simply tens of billions.
Of course, there are definitely not so many banks, trusts and credit unions directly involved, but after the discounts are given, it is probably similar to what Song Chaoyuan said.
"Opening a bank is just like opening a company. How can a business be run without capital?" Song Chaoyuan sighed. "A bank has been burdened with such heavy debts since its establishment. This does not include the packaged debts as equity investment. If all of them are taken into account, how can this bank be run? What future does it have?"
"This..." Shao Heping was silent for a moment. After thinking for a while, he asked, "What you said is not wrong, but the original intention of establishing this bank is somewhat special. The main purpose is to use this bank to mobilize funds and then solve the debt problem step by step. In addition, once the bank is established, the credit unions and some trust institutions in the entire Qiongdao can become the basis of the bank. According to the deposit-taking capacity of these branches, we can obtain funding sources through social deposits, thereby alleviating the debt ratio."
"Haha, this is a good idea, but unfortunately, can you guarantee whether it will be implemented according to this idea in the future?" Song Chaoyuan asked with a sneer.
"What do you mean...?" Shao Heping asked with a frown.
"China has never lacked smart people, and there is a saying that goes, 'The head is determined by the butt.' Depending on where the butt sits, one will consider issues from a different angle." Song Chaoyuan pointed at the sofa where Shao Heping was sitting, and nodded at his temple.
Song Chaoyuan told Shao Heping that theoretically this was fine, but in practice it was unlikely. If it was a healthy commercial bank, it could have developed slowly through a step-by-step model. But this bank had a strong purpose from the beginning, and this purpose also involved such a huge debt problem, so some things were inevitable.
Banks need to attract deposits. Only by attracting deposits can they obtain a large amount of funds and attract the free funds in the society to the bank. In this case, it is impossible for a newly established commercial bank to achieve this in a short period of time. At the same time, because the debt ratio of the bank is extremely high at the beginning of its establishment, it must complete the deposit absorption to solve the funding problem, so it is inevitable that some unusual means will be needed to attract social hot money.
The simplest way is to raise interest rates. According to this year's bank interest rate, the current interest rate for demand deposits is 0.385%, the three-month fixed deposit rate is 2.86%, the six-month fixed deposit rate is 3.08%, the one-year fixed deposit rate is 3.30%, the two-year fixed deposit rate is 3.75%, and the three-year fixed deposit rate is 4.25%...
Of course, this interest rate is just a normal interest rate. In actual operation, different banks have different rates. Some banks with high interest rates offer a three-month fixed deposit interest rate of 6.66%, a six-month fixed deposit interest rate of 9.0%, a one-year fixed deposit interest rate of 10.98%, a two-year fixed deposit interest rate of 11.70%, a three-year fixed deposit interest rate of 12.24%, and a five-year fixed deposit interest rate of 13.86%.
This interest rate is very scary. Take the five-year interest rate of 13.86% as an example. You should know that even if you do business, you may not be able to maintain such a high annual return. So under the same interest rate conditions, ordinary people will choose large banks for deposits, such as the Big Four. After all, the Big Four banks are more reliable in people's minds and are larger in scale, so it is safer to deposit money in them.
In this case, the Commercial Development Bank has to compete with the Big Four Banks to complete its deposit-taking capacity and solve the imminent funding problem. The only way is to further increase interest rates. At that time, as long as the interest rate is higher than that of other banks, or even much higher, then the high interest rate can attract people to deposit their money in the Commercial Development Bank, thus solving this problem.
If it is just a normal increase in some interest rates, then the problem is not too big. After all, commercial banks are commercial in nature, and it is understandable that the interest rates are higher than those of the four major banks. Solving funding problems by absorbing deposits and thus revitalizing funds and projects is generally a normal business behavior.
Unfortunately, judging from the situations Song Chaoyuan and his team have come into contact with so far, the banks, trusts and credit unions that are shareholders of the Commercial Development Bank have gone beyond normal means in terms of raising interest rates to attract deposits. They have already planned to use extremely high interest rates to attract funds, and the proportion of this interest rate completely exceeds the normal proportion.
This is not a normal banking business behavior, it is just to attract deposits. In addition, there is another more serious problem, that is, the shareholders are already heavily in debt, and because of the debt, the shareholders are under great pressure in their own institutions. All parties are racking their brains to find ways to solve the debt and economic losses, including local parties.
It is precisely because of these that once a large amount of deposits are absorbed, what will happen next is extremely terrifying. Song Chaoyuan’s team told Song Chaoyuan that by that time, the funds absorbed will not only be unable to be invested in capital operations, but may even be directly converted by these shareholders into invested equity and packaged debts, and then the funds will be directly withdrawn.
