The financial commission focuses on bond default: zero tolerance and severe punishment for all kinds of debt evasion and cancellation

category:Finance
 The financial commission focuses on bond default: zero tolerance and severe punishment for all kinds of debt evasion and cancellation


Look at the key statements:

2. We should adhere to the general keynote of seeking progress while maintaining stability, handle the relationship between promoting development and preventing risks in accordance with the principles of marketization, legalization and internationalization, and promote the sustainable and healthy development of the bond market.

3. Financial supervision departments and local governments should firmly safeguard the authority of the legal system, implement the regulatory responsibility and territorial responsibility, supervise and urge all kinds of market entities to strictly perform their main responsibilities, and establish a good local financial ecology and credit environment.

4. Uphold the zero tolerance attitude and maintain market fairness and order. We should strictly investigate and deal with all kinds of illegal acts such as fraudulent issuance, false information disclosure, malicious transfer of assets and misappropriation of issuance funds in accordance with the law, severely punish all kinds of evasion and cancellation of debts and protect the legitimate rights and interests of investors.

5. Bond issuing enterprises and their shareholders, financial institutions, intermediary institutions and other market entities must strictly abide by laws and regulations and market rules, adhere to professional ethics, be diligent and responsible, be honest and trustworthy, and effectively prevent moral hazard.

6. We will improve the risk prevention, discovery, early warning and disposal mechanism, strengthen the investigation of potential risks, maintain reasonable and sufficient liquidity, and firmly hold the bottom line of no systemic risk.

7. We should deepen the reform of the bond market, establish and improve the market system, improve the market structure, and enrich product services.

8. We should deepen the reform of state-owned enterprises and improve the quality and efficiency of operation.

The meeting of the financial committee is held regularly, and the main topic of this meeting is the recent bond default events.

The meeting pointed out that the CPC Central Committee and the State Council attach great importance to the healthy and sustainable development of the capital market. The reform and opening up of Chinas bond market has been deepening, the function of serving the real economy has been continuously enhanced, and the market has been operating steadily. The recent increase in cases of breach of contract is the result of the superposition of cyclical, institutional and behavioral factors. We should adhere to the general keynote of seeking progress while maintaining stability, handle the relationship between promoting development and preventing risks in accordance with the principles of marketization, legalization and internationalization, and promote the sustainable and healthy development of the bond market.

The meeting of the financial committee set that the recent bond default cases were the result of the superposition of cyclical, institutional and behavioral factors, and also made it clear that the relationship between promoting development and preventing risks should be handled properly, which provided reassurance to all parties in the market.

Five aspects to deal with bond default risk

The meeting demands that, first, we should improve our political position and earnestly fulfill our responsibilities. Financial supervision departments and local governments should proceed from the overall situation and in accordance with the requirements of comprehensively ruling the country in accordance with the law, resolutely safeguard the authority of the legal system, implement the regulatory responsibility and territorial responsibility, supervise and urge all kinds of market entities to strictly perform their main responsibilities, and establish a good local financial ecology and credit environment. Second, upholding the zero and tolerance attitude. We should strictly investigate and deal with all kinds of illegal acts such as fraudulent issuance, false information disclosure, malicious transfer of assets and misappropriation of issuance funds in accordance with the law, severely punish all kinds of evasion and cancellation of debts and protect the legitimate rights and interests of investors. Third, strengthen the self-discipline and supervision of the industry and strengthen the market restraint mechanism. Bond issuing enterprises and their shareholders, financial institutions, intermediary institutions and other market entities must strictly abide by laws and regulations and market rules, adhere to professional ethics, be diligent and responsible, be honest and trustworthy, and effectively prevent moral hazard. Fourth, strengthen coordination and cooperation among departments. We will improve the risk prevention, discovery, early warning and disposal mechanism, strengthen the investigation of potential risks, maintain reasonable and sufficient liquidity, and firmly hold the bottom line of no systemic risk. Fifth, continue to deepen reform. We should deepen the reform of the bond market, establish and improve the market system, improve the market structure, and enrich product services. We should deepen the reform of state-owned enterprises and improve the quality and efficiency of operation.

Since the default of super Japanese bonds in 2014, the default events in Chinas bond market have occurred from time to time, involving enterprises from private enterprises to state-owned enterprises, and the industries involved are also fully dispersed. Normalization of default has become a reality. Recently, in view of individual bond default events, the regulatory authorities have taken timely action, resulting in a number of institutions being supervised.

Following Haitong Securities, on November 19, Industrial Bank of China, China Everbright Bank, China Chengxin international credit rating Co., Ltd. and other institutions were also investigated by self-discipline regulatory agencies for suspected breach of contract by Yongmei holdings. On November 20, China Securities Regulatory Commission (CSRC) took administrative supervision measures to issue warning letters to brilliance group, and decided to file a case against its suspected information disclosure violations, conduct synchronous verification on intermediary agencies involved in relevant bonds of brilliance group, and seriously investigate and punish relevant illegal behaviors. China Merchants Securities received the warning letter.

After the default of high credit bonds, the market pressure faced by rating agencies is the first to bear the brunt. Credit rating agencies violate regulations, which is not conducive to creating a fair, just, honest and effective market environment. At the same time, the Underwriters as gatekeepers are also questioned whether they have fulfilled their due diligence obligations and verification responsibilities. This will become the screening criteria for the future bond market.

Severely punish all kinds of evasion and cancellation of debts

The meeting of the financial committee has made clear the responsibilities of all parties in the event of bond default, requiring the financial regulatory authorities, local governments and market entities to perform their respective duties and establish a good financial ecology and credit environment. At the same time, it also made clear the regulatory practices in dealing with default events. First, we should crack down on all kinds of illegal and illegal behaviors, naming debt evasion or cancellation as the debtors compliance The intentional behavior of subjective will, that is, it has the ability to repay but refuses to repay. This behavior completely violates the minimum rule consciousness and contract spirit of the market economy, tramples on the market discipline, and seriously disrupts the credit cornerstone of the healthy development of credit debt and even the whole capital market. In this regard, we should be open-minded and not soft hearted. Second, it is necessary to reform the bond market and improve the system protection. It is also required to strengthen the cooperation between departments and keep the bottom line of systemic risks. The meeting also pointed out that it is necessary to resolutely safeguard the authority of the legal system in accordance with the requirements of comprehensively ruling the country according to law. After the normalization of bond default, the default disposal should be more governance and marketization. In July 2020, the Supreme Peoples Court issued the summary of the National Forum on trial of bond dispute cases, which made clear and standardized the disposal process of bond default. This has opened a new chapter of default disposal of bonds, which is conducive to the protection of investors legitimate rights and interests. Source: Securities Times net editor in charge: Yang Bin_ NF4368

The meeting also pointed out that it is necessary to resolutely safeguard the authority of the legal system in accordance with the requirements of comprehensively ruling the country according to law. After the normalization of bond default, the default disposal should be more governance and marketization. In July 2020, the Supreme Peoples Court issued the summary of the National Forum on trial of bond dispute cases, which made clear and standardized the disposal process of bond default. This has opened a new chapter of default disposal of bonds, which is conducive to the protection of investors legitimate rights and interests.