In the past 20 years, the domestic financial holding industry has experienced an evolution from exploration to focus, from chaos to order, and from common sense management to professional operations. Its development journey has gone through three stages:

Article author | McKinsey & Company

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China's financial holding industry has gone through three major development stages

In the past 20 years, the domestic financial holding industry has experienced an evolution from exploration to focus, from chaos to order, and from common sense management to professional operations. Its development journey has gone through three stages (see Figure 1):

The first stage, the embryonic period (2002-2008):

has begun to take shape, and actively explores the layout

With the approval of the State Council, my country's first batch of financial holding comprehensive groups have officially launched pilot projects. In the national "Eleventh Five-Year Plan" , relevant resolutions on steadily advancing the comprehensive operation pilot in the financial industry were also clearly stated. At this stage, major comprehensive financial holding groups are gradually applying for financial licenses and mergers and acquisitions, completing the core financial business layout, and building the first echelon of my country's financial holding industry. At the same time, some central enterprise groups have also begun to deploy financial services due to their own industrial development needs, mainly providing differentiated financial services with the group industry as the core. So far, my country's financial holding industry has begun to sprout.

The second stage, the expansion period (2008-2018):

Rapid expansion, potential risk accumulation

With the support of national policies, my country's financial control industry has entered a stage of rapid expansion. The "Eleventh Five-Year Plan for Development and Reform of the Financial Industry" released in 2008 clearly stated that financial institutions are encouraged to leverage the synergistic advantages of comprehensive operations and improve the overall efficiency of resource allocation in the financial market through the establishment of financial holding companies and other forms. In the following 10 years, various types of capital entered the industry one after another, and the industry structure gradually differentiated. Various types of central enterprises, large state-owned groups, and local financial holding companies have deployed core financial resources around their own industry and urban development needs, and integrated financial license resources through the establishment of financial sector companies (see Figure 2). Private capital has also entered the financial business in a big way, investing in and controlling financial institutions through mergers and acquisitions and equity participation, and established private financial holding groups to achieve rapid expansion. Internet financial holding company relies on its traffic advantages to explore ways to establish a financial platform, continuously obtain financial licenses, and form a de facto financial holding group. Due to the gaps in supervision at this time, there are risks hidden behind the "letting a hundred flowers bloom". For example, individual financial holding companies have complex ownership structures, with hundreds of direct and indirect shareholders, and there are cross-funding, circular capital injection, and false In situations such as capital injection, the group lacks the ability to Real capital that can withstand risks; another example is that some financial holding companies use shell companies to obtain funds from financial subsidiaries through borrowing and other methods; some financial holding companies also use online channels to obtain income through information data sharing and complex related-party transactions , gradually deviating from the original intention of serving the real economy, and inherent risks continue to accumulate.

The third stage, standardization period (2018 to present):

A framework has been established, and regulatory norms have been introduced one after another.

Since 2018, the State-owned Assets Supervision and Administration Commission and the central bank have issued relevant documents to standardize capital operations and fill the regulatory gaps.In the context of continuous promotion of supervision and the introduction of financial control-related measures, the People's Bank of China officially issued the "Trial Measures for the Supervision and Management of Financial Holding Companies" in September 2020, which clarified that the regulatory targets are cross-industry investments by non-financial enterprises The financial holding company formed has raised issues such as equity structure, information sharing, and related transactions that are prominent among private and Internet financial holdings. Targeted supervisory measures have been implemented; at the same time, certain encouragement and guidance have been provided to comprehensive finance companies that comply with regulations and financial holding companies with industrial and financial characteristics, which are mainly reflected in:

• Clarify the ownership structure: clearly requires financial holding companies and those they hold The equity hierarchy of financial institutions needs to be streamlined, and cross-shareholdings and reverse shareholdings between financial holding companies and financial institutions they control are prohibited;
• Standardize information sharing: requires financial holding companies to comply with laws and regulations when sharing customer information internally. They should first obtain written authorization or consent from customers, comprehensively standardize internal information sharing, and avoid problems such as leakage of customer information and confusing and non-traceable data sharing;
• Restricting related-party transactions: puts forward clear requirements for related-party transactions and Formulate a negative list, set a limit for related-party transactions, comprehensively regulate related-party transactions, and prevent some financial holding companies from conveying improper interests through complex related-party transactions;
• Build risk isolation : Require financial holding companies to cooperate with their controlling financial institutions and financial institutions Establish a risk isolation system between institutions and non-financial institutions, strengthen concentration risk management, improve risk transparency, and effectively control risk spread.

Compared with foreign financial holding companies, domestic financial holding companies generally have industrial group backgrounds due to factors such as historical evolution and shareholder resources.. As a result, financial holding companies generally need to consider the needs of industrial development in terms of license layout and business coordination. , which is significantly different from the business model of mainstream foreign financial holding companies, which are relatively pure and carry out financial collaboration with professional comprehensive financial services as the core. In the future, as domestic financial holding companies steadily advance their business based on their own industry characteristics and development orientation, differentiation and specialization will become more distinct, and resource attributes, target customer attributes and regional attributes will become the key to determining the company's positioning.

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The four main types and characteristics of China's financial holding companies

Driven by internal and external factors such as its own development and the refinement of financial supervision, China's financial holding industry has gradually differentiated into comprehensive financial type, industrial service type, capital operation type, and regional integration type in the process of continuous evolution and development. There are four major types of financial holding companies. Different types of financial holding companies have different emphasis on financial license endowments, shareholder resource support, and business collaboration models (see Figure 3).

1. Comprehensive financial type: Comprehensive financial financial holdings are mainly divided into two types. One is a financial group formed by banks, insurance, asset management and other holdings of other financial institutions. The main business of this type of financial group is clear, and the regulatory authorities have Separate supervision requirements have been established with insurance groups; the other is controlled by non-financial institutions, and the shareholders are large comprehensive groups. Currently, it is mainly supervised by the central bank. Comprehensive financial financial holding companies generally have many years of experience in the national financial industry, have accumulated abundant capital and financial customer information, completed the layout of financial licenses earlier, have national banking, insurance and other financial licenses, and have comprehensive financial service capabilities for retail customers. .
2. Industrial service type: Industrial service type financial holding shareholders are mainly large central enterprises and state-owned industrial groups. Its strong industrial foundation provides a huge internal and external market for the financial holding development, as well as rich upstream and downstream industrial customer resources. The financial licenses of industrial service-oriented financial holding companies are mainly designed around their own industry development needs.
3. Capital operation type: Capital operation type financial holding shareholders are mainly central enterprises or local industrial groups. The financial licenses provide services around the financial capital market. The degree of marketization is high, and the financial sector has become one of the main contributors to the group's profits. Among the core financial licenses possessed by capital-operating financial holding companies, some licenses often have regional business restrictions. Therefore, on the one hand, financial holding companies fully tap the group's industrial resources to develop internal financial markets; on the other hand, they actively explore based on the advantages of regional industrial resources. Market-oriented business.
4. Regional integration type: is generally established by the local financial system to integrate regional financial resources. Through financial holding companies, it integrates local development financial licenses. This type of financial holding generally has regional banking resources such as urban and rural commercial banks, and is usually positioned as a management platform. It further focuses on policy orientation through the establishment of financial holding companies to better support local economic development.

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Three major development trends of China's financial holding companies in the future

Combining research on domestic and foreign financial holding industry trends and best practices, we believe that China's financial holding industry will gradually move towards standardization, specialization and specialization, and will further differentiate itself in the future. , professional empowerment, collaborative sharing and rapid development.

Trend 1: Resource-driven differential positioning

In the future, financial holding companies will combine their own resource endowments to further focus on all-round large-scale financial holdings, specialty financial holdings and regional financial holdings. Among them, all-round large-scale financial holdings are mainly further developed from the current comprehensive financial financial holdings. Through the already built full financial license resources and national exhibition industry advantages, the resources are coordinated to provide customers with more complex and diversified financial services. Featured financial holding will be customer-centric, focus on special customer groups and provide differentiated services based on its own license and shareholder resource endowment. Regional financial holdings are mainly composed of regional integrated financial holding companies and will become a platform financial holding company that focuses relatively on management. Different financial holding companies will also reposition their customers, business/licenses, channels and capabilities based on their own resource endowments, and clarify future development priorities and construction paths.

Trend 2: Transformation from license management to professional empowerment

Since financial subsidiaries generally have a wide variety of businesses and strong professionalism Characteristics, Financial Holding Company will mainly support and empower in the future through strategic empowerment, capital empowerment, management empowerment, talent empowerment and technology empowerment , relying on strategic management, capital operation, risk services, etc. Enable financial subsidiaries to conduct business and avoid excessive intervention, thereby enhancing the overall value of financial holdings.

Trend 3: Build industry-finance synergy capabilities,

Build a competitive "moat"

Compared with foreign financial holdings, my country's financial holding industry generally has stronger industrial finance characteristics. As the foundation of China's economic development, the real economy will still be the focus of China's economic development for some time to come. Utilizing its own advantages and industry characteristics, increasing service efforts based on customer pain points, and adapting to industry development trends to create differentiated industry-finance synergy capabilities will become an important starting point for major financial holding companies to build business moats.

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