Several provincial governments have recently released their work reports outlining key tasks for 2026. A review indicates that many regions have explicitly committed to steadily advancing the reduction in the number and improvement in the quality of small and medium-sized financial institutions. Notably, Yunnan, Gansu, and Ningxia have disclosed in their government work reports that they will establish provincial-level rural commercial banks.
Industry experts note that the provincial unified legal entity model for rural commercial banks offers stronger control, deeper integration, and greater advantages in risk resolution, policy implementation, and resource coordination. This model is considered more suitable for addressing regional financial risks and meeting the reform needs of optimizing local financial systems.
Plans to establish provincial-level rural commercial banks have been identified in Yunnan, Gansu, and Ningxia as a key task for 2026.
Yunnan mentioned it will steadily and orderly establish Yunnan Rural Commercial Bank. At the beginning of 2026, relevant rural credit institutions signaled reforms. On January 5, 2026, Yunnan Daily published an announcement stating that the Yunnan Provincial Rural Credit Cooperatives Union and 122 municipal and county-level legal entity rural credit cooperatives in Yunnan (collectively referred to as the institutions involved in the reform) have, in accordance with laws and regulations, respectively completed their internal corporate governance procedures. They have reviewed and passed resolutions concerning the establishment of Yunnan Rural Commercial Bank Co., Ltd. through a new setup merger.
Compared to previous years' statements, Gansu explicitly stated in 2026 that it will "consolidate the achievements of reforming and de-risking small and medium financial institutions, and establish and operate Gansu Rural Commercial Bank." In 2023, Gansu proposed "establishing Gansu Rural Commercial Union Bank." In the government work reports for the following two years, the related descriptions were "steadily advancing the reform of rural cooperative institutions" and "completing the task of high-risk institutions exiting high-risk status."
Ningxia mentioned completing the unified legal entity reform of rural commercial banks across the region. In its 2026 New Year message, Yellow River Rural Commercial Bank revealed that the final deepening reform plan for Ningxia Rural Commercial Bank had been approved.
Furthermore, the Heilongjiang Provincial Credit Union mentioned in its 2026 New Year message "taking the opportunity of establishing a provincial-level rural commercial bank." This indicates that the reform of rural credit institutions in the province is also scheduled to begin.
Regarding the reform model, the four aforementioned provinces (autonomous regions) have all chosen the provincial unified legal entity model. A chief expert and director from a Shanghai financial research laboratory stated, "The unified legal entity model breaks the pattern of dispersed county-level institutions, achieves comprehensive integration of equity, assets, and management for provincial rural commercial banks, forms a single legal entity, and effectively solves problems like multiple layers, difficulty in coordination, and weak execution inherent in the union model."
He explained that in terms of capital operations, a unified legal entity can coordinate provincial capital resources, enhancing overall capital strength and risk resilience, and more efficiently resolve risks associated with regional high-risk institutions. In management and operations, it enables unified strategic planning, business standards, technology systems, and brand building, facilitates cross-regional allocation of funds, leverages economies of scale and synergies, and better aligns with major provincial strategies and the needs of inclusive finance.
In recent years, 13 provinces (autonomous regions) have established provincial-level legal entity institutions. Among them, Zhejiang, Shanxi, Sichuan, Guangxi, Jiangsu, Jiangxi, and Guizhou opted for the union bank model, while Liaoning, Hainan, Henan, Inner Mongolia, Jilin, and Xinjiang adopted the unified legal entity model.
Focusing on the "follow-up work" in 2026, many regions have also made deployments. In 2025, the establishment and operation of Guizhou Rural Commercial Union Bank was included in that province's government work report. In 2026, the province proposed "steadily advancing the establishment of municipal (prefectural) rural commercial banks" to further deepen reform achievements. In 2025, Jilin Rural Commercial Bank was approved to commence operations. Jilin mentioned supporting Jilin Rural Commercial Bank in deepening reforms and developing healthily.
The Central Economic Work Conference proposed deeply advancing the reduction in quantity and improvement in quality of small and medium financial institutions. This policy guidance is also reflected in various provincial government work reports for 2026.
For example, Fujian stated it will steadily advance the reduction and quality improvement of small and medium financial institutions; Jiangsu mentioned optimizing the financial ecological environment and promoting the reduction and quality improvement of small and medium financial institutions; Sichuan referred to deeply advancing risk disposal and the reduction and quality improvement of small and medium financial institutions.
In recent years, the reduction in number and improvement in quality of small and medium financial institutions have shown significant results, with regional layouts continuously optimizing. According to a research report from Guohai Securities, integration of small and medium financial institutions across regions was notably effective in 2025. The number of legal entity banking financial institutions decreased by 225 compared to the end of 2024, and by 534 compared to the end of the "13th Five-Year Plan" period.
Regarding how to further advance the reduction and quality improvement of small and medium financial institutions in the future, the expert believes it requires adhering to market-oriented and rule-of-law principles, systematically implementing measures from aspects such as institutional integration, risk resolution, governance enhancement, and service optimization.
He suggested, first, optimizing the institutional layout by strictly controlling the number of new institutions and promoting the reduction and exit of high-risk, low-efficiency small and medium financial institutions through mergers, reorganizations, restructuring, and exits, thereby optimizing the allocation of regional financial resources. Second, precisely resolving risks by establishing monitoring and disposal mechanisms for high-risk institutions, using multiple measures to reduce non-performing assets, addressing capital shortfalls, and safeguarding the bottom line of financial security. Third, improving corporate governance by standardizing equity management, strengthening internal controls and compliance operations, and enhancing the level of corporate governance. Fourth, focusing on primary responsibilities by guiding small and medium financial institutions to return to their roots of supporting agriculture and small businesses and serving the local real economy, leveraging digital transformation to improve service quality and efficiency. Fifth, strengthening regulatory guidance by improving differentiated supervision and market-based exit mechanisms, promoting a reasonable reduction in the number and a steady improvement in the quality of small and medium financial institutions, and building a stable and efficient local financial ecosystem.