Several small and medium-sized banks have experienced failed auctions of their equity. Experts suggest that banks should routinely disclose the underlying reasons for equity changes to the public and clarify the allocation of risks.

Recently, there has been a frequent occurrence of equity auctions for small and medium-sized banks, but successful cases are rare, and there have even been multiple instances of auctions failing to attract bids despite being offered at a discount. In light of the frequent failures in equity auctions for small and medium-sized banks, how can banks mitigate the negative impact on themselves? Wang Pengbo, a senior analyst in the financial industry at BoTong Consulting, offers three suggestions: First, it is crucial to clarify the hierarchy of shareholders in distress, distinguishing between major shareholders and scattered minor shareholders. Banks should engage judicial disposal agencies in advance regarding shareholders with higher holdings and outline potential candidates for equity transfer, aiming to shorten the auction cycle and avoid accumulating negative public sentiment due to repeated failed auctions. Second, there should be a regular external disclosure of the underlying reasons for equity changes, clearly indicating that the risks belong to individual shareholders rather than the bank's asset quality and operational fundamentals. This will help stabilize market expectations, as well as the perceptions of depositors and industry partners. Finally, a comprehensive investigation of existing shareholders' related loans should be conducted, tightening the approval rules for related transactions and gradually reducing the relatively high proportion of related credit. This will cut off the channels through which shareholder debt risks can be transmitted to the bank's credit assets.