Changshu Bank(SH:601128) 2 1 Shi Ji Jing Ji Bao Dao·2025-07-15 11:31Core Viewpoint - The reform and risk mitigation of village and town banks in China are accelerating, with multiple cases of absorption and merger occurring simultaneously across various regions, indicating a shift from pilot exploration to large-scale replication in the sector [3][4][11]. Summary by Sections Recent Developments - Recent announcements from banks in Guizhou, Xinjiang, Sichuan, and Jiangsu indicate a trend of absorption and merger of village and town banks, with Guizhou Bank merging with Tongren Fengyuan Village Bank and Xinjiang Bank planning to absorb Xinjiang Huihe Bank [1][2]. - Chengdu Rural Commercial Bank announced plans to absorb and merge six village banks in Sichuan, with regulatory approval granted shortly after [1]. Regulatory Context - The National Financial Regulatory Administration has prioritized the reform and risk mitigation of small financial institutions, with nearly 200 small financial institutions expected to merge or be dissolved by 2024 [4][11]. - As of mid-July, 90 village banks have exited the market this year, surpassing the total of 83 from the previous year, highlighting the urgency of addressing risks in weaker economic regions [4]. Merging Strategies - The absorption and merger of village banks have developed into four distinct strategies: 1. Branch Conversion: The most common method, where the village bank's license is canceled, and the original branches are rebranded as branches of the parent bank [6][7]. 2. Equity Acquisition: Involves acquiring all shares of the village bank before merging it into a wholly-owned subsidiary [7]. 3. Survival Mergers: Multiple village banks controlled by the same parent bank merge into one, retaining the license of the surviving entity [8]. 4. Cash Buyouts: The parent bank buys out the village bank's net assets and dissolves it, integrating its assets and liabilities [9]. Market Trends - The trend of bank branch closures is evident, with 2,027 branches exiting the market this year compared to 1,673 last year, driven by high costs and the rise of mobile banking [9]. - For banks still in an expansion phase, merging village banks and establishing branch networks is seen as beneficial for market penetration [10]. Future Outlook - The restructuring of village banks is expected to accelerate, with a focus on risk mitigation and enhancing service to rural revitalization and small enterprises [11]. - Regulatory support is deemed necessary for small banks to thrive, including differentiated regulatory rules and incentives for effective risk management [11].