Tao Ling: shaping the future of asset management industry by deepening reform

category:Finance
 Tao Ling: shaping the future of asset management industry by deepening reform


For the former, looking back on the process of deleveraging, we realize that if we do not seize the precious time window since 2017 to deleverage, there will be very limited room for deleveraging now. The vast majority of small and micro enterprises do not get low-cost financing through asset management products, so governance of the shadow banking chaos is not the reason why it is more difficult and more expensive for small and micro enterprises to finance, Tao Ling said

For the latter, it is inevitable to break the rigid exchange of asset management products, and some investors will suffer losses, but all investors will be educated, so as to cultivate correct investment ideas and earnings expectations. Tao Ling said.

What is concerned by all parties is that we have also reached an agreement on the extension of the transition period of the new asset management regulations. Tao Ling said that in the process of rectification, it was found that the ability of issuing new products to continue old assets was limited, and the scale of non-standard assets in stock was large, which made it difficult to dispose of them. At present, the epidemic situation has increased the downward pressure on the macro-economy, and financial institutions are facing the dual constraints of stable growth and risk prevention in implementing the new asset management regulations. Therefore, through repeated research and calculation, the transition period of the new asset management regulations is extended by one year to the end of 2021. To extend the transition period is not to change the principles and standards of the new asset management regulations, but to reduce the pressure on the rectification of financial institutions, reduce the impact on the financial market, stabilize the financing of the real economy, and avoid excessive credit contraction caused by centralized disposal of existing assets. In terms of implementation, financial institutions are required to assume the main responsibility, and the regulatory authorities monitor the implementation quarterly. A small number of financial institutions that have not yet completed the rectification at the end of the transitional period shall be dealt with in individual cases, so as to avoid the adverse impact of one size fits all rigid rectification.

Of course, in practice, there are still some work that we want to promote is not progressing enough. The main reasons are: it is difficult to realize the unified tax policy of similar asset management products, which has been called for by the industry for a long time; moreover, there are different understandings on whether the unified application of the upper law of asset management business is the securities law, the securities investment fund law, or the trust law.

For the next development, Tao Ling pointed out: the transition period will always be over, and the industry will always return to normal. The future of the asset management industry depends on the determination and action to continue to deepen the reform of the asset management industry.

Therefore, one is to pursue sustainable development in an uncertain environment through deepening reform. It is necessary to firmly take the risk return matching of all kinds of assets as the basic concept, carry out active management, resolutely break the rigid exchange, strengthen the investor suitability management at the capital end, improve the asset allocation ability of the investment side, and enhance the professional service level. The second is to boost the structural reform of the financial system through deepening reform. All kinds of asset management institutions will be the institutional investors in the capital market that are comparable to insurance companies and social security funds. They can focus on raising and managing stable medium and long-term funds, carry out equity investment, long-term investment and value investment, and promote fundamental changes in the financing structure. Third, through deepening reform, we should integrate into a higher level of financial industry and open up to the outside world. Fourth, through deepening the reform, improve the adaptability of asset management industry supervision.

The following is the full text of Tao Lings speech:

Shaping the future of asset management industry by deepening reform

u2014u2014Speech at the 2020 China Asset Management Annual Meeting

Dear leaders, industry experts and new and old friends

Good morning. Im very glad to receive the invitation of 21st century economic report to attend the annual asset management meeting for the fourth consecutive year. 2020 is an extraordinary year. Today, the annual meeting of asset management can be held in Shanghai as scheduled, thanks to Chinas huge success in fighting the epidemic and restoring economic and social development relying on its institutional advantages. Under the impact of the epidemic, the global economic and financial environment is undergoing profound changes. The impact on the asset management industry is not only realistic, but also far-reaching, which makes this years annual meeting particularly special. Recently, as expected by the industry, the policy adjustment for the transition period of the new asset management regulations has been announced, which can balance the actual needs and the fundamental determination, and transmit a clear signal. At this unprecedented moment, I would like to share with you the theme of how to understand the past, on this basis, further deepen the reform, lead and shape the future of the asset management industry.

One

To know where the future is going, we must not forget where we came from in the past.

In the past, with the introduction of new regulations on asset management as a sign, what did we do right in more than three years? It can be said that with the joint efforts of the peoples Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission, the following two things have been done correctly:

The first thing is to seize the precious time window of deleveraging and effectively resolve the risk of shadow banking.

High leverage means high debt, and high debt leads to high risk, which is a lesson learned from the global financial crisis again and again. In Chinas financial system dominated by indirect financing, the objective reasons for high leverage ratio are high savings rate, but maintaining moderate leverage ratio and matching the debt burden with the growth and return of the real economy is the basis for maintaining macro stability.

After the international financial crisis in 2008, the macro leverage ratio continued to rise, and the shadow bank expanded rapidly, which has become a major hidden danger of macro financial risk. From 2008 to 2016, Chinas monetary conditions and supervision were loose, and the average annual increase of macro leverage ratio was more than 10%. The shadow banking business such as interbank business and bank financial management developed rapidly, which played an important role. Although shadow banking made up for the deficiency of traditional financial services to a certain extent, many funds carried out regulatory arbitrage, multi-layer nesting and illegal leverage From the real to the virtual. At that time, the international community was generally pessimistic about Chinas shadow banking, believing that the scale was huge and the base number was unclear. Once the risk broke out, the whole financial system would be shaken.

Since 2017, from deleveraging to stabilizing leverage, the scale of shadow banking has shrunk and the risk has converged. Since the beginning of 2017, regulatory authorities have focused on regulating shadow banking businesses such as interbank, financial management and off balance sheet. At the same time, as the new asset management regulations have entered the stage of drafting and public consultation, the expectations and behavior margin of financial institutions have also begun to change. In April 2018, the new regulations on asset management were officially issued, which became a landmark event of deleveraging. By the end of 2019, the scale of Chinas shadow banking has shrunk by 16 trillion yuan in three years, and the interbank channel business of trust industry has decreased by nearly 5 trillion yuan compared with the historical peak. Chinas achievements in governance of shadow banking risks have been recognized by the International Monetary Fund (IMF), and positively evaluated by international rating agencies and domestic mainstream industry institutions. At the same time, the macro leverage ratio has only increased by 5.9 percentage points in the past three years. It should be noted that the growth rate has slowed down significantly, rather than the precipitous decline in absolute volume. Therefore, it can be called stable leverage.

In 2020, in order to cope with the severe impact of the epidemic on the economy and finance, the macro leverage ratio will increase periodically. This year, in order to create a reasonable and abundant liquidity environment in the financial market and expand credit support for the real economy, macro policies have increased counter cyclical regulation, and the scale of credit and social financing has risen rapidly. According to the calculation of market research institutions, it is estimated that the macro leverage ratio will exceed 270% in 2020, about 20% higher than that in 2019, and the growth rate is second only to that after the international financial crisis In 2009 (35.5 percentage points). At this moment, looking back on the process of deleveraging, we realize that if we do not seize the precious time window since 2017 to deleverage, now, the space for deleveraging will be very limited.

The reason why this issue is emphasized is that there are still some vague understandings in the society. Some people believe that high leverage does not affect financial stability, and regulating shadow banking leads to difficulties and expensive financing for private enterprises and small and micro enterprises. There are deep-seated institutional reasons for the difficulty and high financing of private and small and micro enterprises, mainly including two aspects: first, the effectiveness of financial resource allocation is insufficient, and loans are mostly invested in large enterprises, government financing platforms and real estate enterprises; second, private and small and micro enterprises have high risk, opaque information, lack of guarantee, and loan pricing is difficult to cover risks. Therefore, it is too simplistic to attribute the difficulty and high cost of financing of private and small and micro enterprises to the deleveraging policy. In fact, in the past of frequent occurrence of asset management chaos, a large number of asset management funds were invested in infrastructure, real estate industry and local government financing platform through outsourcing business, multi-layer nesting and fund pool. The vast majority of small and micro enterprises did not obtain low-cost financing through asset management products. Therefore, the governance of shadow banking chaos is not the reason why financing of small and micro enterprises is more difficult and expensive.

In retrospect, the second thing to do right is to reach the greatest consensus on the nature and positioning of the asset management industry.

After three years of governance practice, on the basis of summing up experience and learning lessons, all parties have reached the following consensus:

One is to reach a consensus on the nature of asset management business: that is, the seller is responsible and the buyer is responsible. First of all, as the trustee, asset management institutions should set up the code of conduct of giving priority to customers interests, and stick to the professional ethics of honesty, credit and diligence. Under this premise, a healthy financial market must be one in which investors bear their own risks, and both profits and risks are enjoyed and borne by investors. Therefore, it is inevitable to break the rigid exchange of asset management products. Some investors will suffer losses, but all investors will be educated, so as to cultivate correct investment philosophy and income expectation.

Second, we have reached a consensus on the positioning of the asset management industry: in the past, the asset management industry mainly solved the indirect financing of the real economy, which was characterized by investment in non-standard assets, guaranteed capital and income, and the credit risk still borne by the banking system. But in essence, asset management business is a direct financing that connects investors and financing parties, and financial institutions play a service role. Any deviation from the direct financing positioning will not only disturb the market, but also damage the operation of the institution itself. Asset management industry can be subdivided into wealth management, investment consultants, investment banks, etc. different asset management institutions have different advantages, division of labor and competition. In the past year, we have seen a clean start and standardized development of bank financial management companies. 21 bank financial management companies have been approved to set up. Trust companies, securities companies, public fund companies and insurance asset management companies are all returning to their roots, making orderly rectification and stepping into a stage of sound development.

Third, we have reached a consensus on the regulatory direction of the asset management industry: in view of the problems of indirect direct financing, financing of investment business, internalization of off balance sheet risks and public offering of private equity products in the past, we should unify regulatory standards, strengthen consistent supervision and eliminate arbitrage space. With the introduction of new regulations on self financing management, various regulatory departments have continuously improved the standard regulations and relevant supporting rules, and regulatory measures for bank financial management, financial management subsidiaries, insurance asset management products, and fund trust have been successively introduced. Although the names are different, the differences in rules have gradually narrowed, and the substantive contents have converged. Unified regulatory standards for the asset management industry have been initially established.

Fourth, we have reached a consensus on the development prospects of asset management institutions: asset management institutions are important institutional investors in the financial market, and should play the role of market stabilizer and booster. According to the analysis of market institutions, Chinas residents financial assets account for only 20% of all assets, and 95% of bank deposit customers have not yet become financial customers. In the future, the asset allocation of residents will transfer from real estate and deposits to asset management products. It can be said that the asset management industry has just started, which contains huge development potential and growth space.

The above consensus is the basis for us to jointly promote the healthy and sustainable development of asset management industry.

What is concerned by all parties is that we have also reached an agreement on the extension of the transition period of the new asset management regulations. In the process of rectification, it is found that the ability of issuing new products to renew old assets is limited, and the scale of non-standard assets in stock is large, which makes it difficult to dispose of them. At present, the epidemic situation has increased the downward pressure on the macro-economy, and financial institutions are facing the dual constraints of stable growth and risk prevention in implementing the new asset management regulations. Therefore, through repeated research and calculation, the transition period of the new asset management regulations is extended by one year to the end of 2021. To extend the transition period is not to change the principles and standards of the new asset management regulations, but to reduce the pressure on the rectification of financial institutions, reduce the impact on the financial market, stabilize the financing of the real economy, and avoid excessive credit contraction caused by centralized disposal of existing assets. In terms of implementation, financial institutions are required to assume the main responsibility, and the regulatory authorities monitor the implementation quarterly. A small number of financial institutions that have not yet completed the rectification at the end of the transitional period shall be dealt with in individual cases, so as to avoid the adverse impact of one size fits all rigid rectification.

Of course, in practice, there are still some work that we want to promote is not progressing enough. The main reasons are: it is difficult to realize the unified tax policy of similar asset management products, which has been called for by the industry for a long time; moreover, there are different understandings on whether the unified application of the upper law of asset management business is the securities law, the securities investment fund law, or the trust law.

Two

One is to pursue sustainable development in an uncertain environment through deepening reform. In 2020, the world has adopted an unprecedented rescue policy to hedge against the impact of the epidemic. The liquidity of the financial market is extremely abundant. The monetary environment will maintain low interest rate and low yield for a long time, and the asset quality will further deteriorate. Low yield environment is the biggest challenge faced by investors, which brings great pressure to the transformation and reconstruction of asset management industry: the yield of bond assets is low, the fluctuation of stock assets is increasing, the frequency of products falling below the net value may increase, and the default of non-standard assets increases. In this regard, we need to firmly take the risk return matching of all kinds of assets as the basic concept, carry out active management, resolutely break the rigid exchange, strengthen the investor suitability management at the capital end, improve the asset allocation ability of the investment side, and enhance the professional service level.

The second is to boost the structural reform of the financial system through deepening reform. At present, Chinas financial system is facing some structural imbalances. Among them, the imbalance of financing structure is mainly manifested in the high proportion of indirect financing and the low proportion of direct financing. At the end of 2019, the proportion of direct financing in the stock of social financing scale is less than 1 / 3. In the direct financing, the proportion of bond financing is high and the proportion of equity financing is low. The stock financing balance of non-financial enterprises only accounts for about 3% of the stock of social financing scale. At the same time, the term structure of funds is also seriously unbalanced. Residents savings are more converted into short-term funds of the financial system. Funds from residents to financial markets (long to short), and from financial markets to enterprises (short to long), form two term mismatches. To change the structural imbalance, we should play the central role of the capital market and promote more efficient capital formation and resource allocation. All kinds of asset management institutions will be the institutional investors in the capital market that are comparable to insurance companies and social security funds. They can focus on raising and managing stable medium and long-term funds, carry out equity investment, long-term investment and value investment, and promote fundamental changes in the financing structure.

Third, through deepening reform, we should integrate into a higher level of financial industry and open up to the outside world. In the past three years, the financial industry has been opening up to the outside world continuously. Foreign institutions have taken control of domestic securities companies and insurance companies. Many global asset management institutions intend to set up wholly-owned public fund companies in China, or participate in the establishment of financial subsidiaries of commercial banks and financial companies controlled by foreign capital. Since last year, Shanghai has given priority to some international asset management centers. The entry of foreign capital management institutions into China not only faces the adaptation to Chinas policy and market environment, but also brings cooperation and competition, which will force the reform and transformation of domestic asset management institutions, promote the integration of industry standards and mature international standards, and boost the global competitiveness of Chinas asset management institutions.

Fourth, through deepening the reform, improve the adaptability of asset management industry supervision. It is necessary to reform and supervise the industry. If it is said that in the past, centralized governance of industrial chaos is the key need to prevent and resolve major financial risks, then in the future, supervision should be normalized. We should focus on improving the consistency of supervision, focusing on information disclosure and fraud prevention, respect the industry characteristics and market rules, promote the separate regulatory system, provide public products that meet the functional and behavioral regulatory needs of the asset management industry, and further explore the best practice of regulatory prudence and inclusiveness. In short, the past is not easy, and the future is not smooth. To lead the asset management industry from making waves to riding the storm, we need to continue to deepen the reform and opening up. All regulators, practitioners, researchers and media colleagues have a mission and responsibility for this. Finally, I wish the forum a complete success! Thank you! This article is from Wang Xiaowu, editor in charge of economic report in the 21st century_ NF

Fourth, through deepening the reform, improve the adaptability of asset management industry supervision. It is necessary to reform and supervise the industry. If it is said that in the past, centralized governance of industrial chaos is the key need to prevent and resolve major financial risks, then in the future, supervision should be normalized. We should focus on improving the consistency of supervision, focusing on information disclosure and fraud prevention, respect the industry characteristics and market rules, promote the separate regulatory system, provide public products that meet the functional and behavioral regulatory needs of the asset management industry, and further explore the best practice of regulatory prudence and inclusiveness.

In short, the past is not easy, and the future is not smooth. To lead the asset management industry from making waves to riding the storm, we need to continue to deepen the reform and opening up. All regulators, practitioners, researchers and media colleagues have a mission and responsibility for this.

Finally, I wish the forum a complete success!

Thank you!