Balancing regulation and growth, laying a solid foundation for financial stability

In the current era of rapidly changing global economic landscape, bank supervision and loan growth have become highly prominent topics in the financial sector, having a profound impact on the stable operation of the financial market and being closely related to the prosperity and decline of the real economy. With the final implementation of the Basel III rules, banks will lobby regulatory authorities for adjustments. Global bank loans are expected to increase by 7% to reach 112 trillion US dollars, and regulatory authorities will pay particular attention to commercial real estate loans.

From the perspective of regulation, regulatory policies play a crucial role in maintaining the stability of the financial system. With the final implementation of the Basel III rules, global banking faces more stringent requirements in terms of capital adequacy ratios, risk management, etc. The implementation of this rule aims to enhance banks' ability to withstand risks and prevent the recurrence of a similar financial crisis like that in 2008. Regulatory authorities continuously monitor the compliance of financial institutions and strengthen supervision and inspection of bank fund flows, fund efficiency, service charges, etc. For example, issuing fines for violations such as deposit-loan linkage is to standardize market order, avoid unreasonable business practices by banks from increasing the burden on enterprises, and ensure a fair competitive environment in the financial market. Regulatory policies are not static but are adjusted flexibly according to economic conditions. During periods of significant downward pressure on the economy, regulatory standards are moderately relaxed to encourage banks to increase support for the real economy, such as offering preferential risk capital weights for loans to small and medium-sized enterprises and relaxing the tolerance for non-performing loan ratios for inclusive small and medium-sized enterprises, to enhance banks' lending enthusiasm and provide "blood transfusion" to small and medium-sized enterprises.

In terms of loan growth, it plays an irreplaceable role in promoting economic development. New loans are like the "source water" for economic growth. In 2024, China's new RMB loans exceeded 18 trillion yuan. A large amount of funds flowed into enterprises, providing financial support for enterprises to expand production, carry out technological innovation, etc., promoting industrial upgrading and economic structural adjustment. From the perspective of loan structure, the growth of loans in different fields has different meanings. The balance of medium- and long-term loans in the manufacturing sector increased year-on-year, and the balance of loans for "specialized, refined, distinctive, and innovative" enterprises rose, helping the real economy move towards high-endization; the growth of inclusive micro and small enterprise loans can stimulate the vitality of micro and small enterprises, promote employment and improve people's livelihood.

However, there is also a delicate balance between regulation and loan growth. Excessively strict regulation may dampen the enthusiasm of banks to extend loans, making it difficult for enterprises to obtain sufficient financial support and hindering economic development; conversely, overly lax regulation may lead to excessive lending by banks, resulting in the accumulation of credit risks and threatening financial stability. For instance, if the regulation relaxes the requirements for bank loan approval, banks may blindly extend loans in pursuit of performance. Once the economic situation deteriorates, the non-performing loan rate will rise significantly, and even trigger systemic financial risks. However, if the regulation is overly strict regarding banks' capital adequacy ratio, loan direction, etc., banks may tighten credit due to concerns about risks, and many enterprises with development potential will be trapped in difficulties due to a lack of funds.

In order to achieve a positive interaction between supervision and loan growth, the regulatory authorities should continuously innovate their supervision methods, utilize technologies such as big data and artificial intelligence to enhance supervision efficiency, accurately identify risks, and under the premise of ensuring financial stability, create conditions for reasonable loan growth. Banks themselves also need to strengthen their risk management capabilities, improve internal assessment mechanisms, and while pursuing loan scale growth, pay attention to loan quality. They must not ignore long-term risks for short-term benefits.

Bank supervision and loan growth are mutually reinforcing. Only by finding a balance between the two can the stable development of the financial market be achieved, providing a solid foundation for the prosperity of the real economy and helping the global economy move forward steadily in a complex and volatile environment.