《Money Machine》

作者: Shan Weijian
出版: Wiley
出版时间: 2023-02-07

In 2008, the banking regulator issued a new rule requiring banks to gradually increase their NPL coverage ratios (i.e., the ratio of the money set aside for the NPLs to the amount of NPLs) to be no less than 150%. If a bank had 100 yuan of bad loans, it had to set aside 150 yuan or more for it. Consequently, it would be much more costly to keep an NPL than to write it off.
I had asked the banking regulator Liu Mingkang why he imposed tough NPL coverage ratios. He said he did not trust the NPL levels reported by Chinese banks and believed that a large amount of loans clas- sified as “special mention”would eventually migrate into “substandard” or NPLs. A tougher policy would force banks to write off NPLs to maintain a clean balance sheet, which would in turn make the banking system healthier. That, I thought, was the best policy move on the part of the banking regulator to squeeze NPLs out of banks.

I have always thought that in investing, luck, good or bad, is an important factor in the eventual outcome. The other key success factor is acumen or good judgment. But one without the other will not lead to success in life.

His style of leadership was both hands-on and inclusive; he set targets in consultation with senior officers and with the board. He would listen attentively, gazing directly into the eyes of the speaker. If he agreed, he would say, “That’s an excellent idea … If he did not agree, he would not brush aside the comment; instead, he might say, “Well, that’s a good point, but … before making his own point. I had never met a leader as patient and diplomatic as he was.

Few deals proceed without detours

In China at that time, interest rates were controlled by the PBOC, which set a floor to lending rates and a ceiling to deposit rates. Thus the spread was practically guaranteed by the central bank and much higher than in other markets, regardless of competition between banks. As such, banking in China was like a license to print money, provided, of course, the bank did not throw money away by making bad loans.

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