Central bank media: the recent credit default storm has limited impact on Commercial Banks

category:Finance
 Central bank media: the recent credit default storm has limited impact on Commercial Banks


The impact of asset quality is small

Since the beginning of this year, commercial banks have shown strong performance in increasing their holdings of credit bonds, which has become an important source for commercial banks to increase their income. However, the overall volume is still small. According to the calculation of the banking research team of China Thailand securities, the scale of on balance sheet credit bonds of the banking industry is expected to be 6 trillion yuan, accounting for less than 3.5%, and the scale off the balance sheet is expected to be 10 trillion yuan. The latter has certain risks.

Sentiment will certainly be affected, but the liquidity impact on the bond market is relatively limited, and the substantial impact on commercial banks is also small. A person in charge of the banks financial market business told the financial times that after the incident, some institutions tended to be cautious and took the initiative to redeem some bonds, especially in coal, steel and other fields. In addition, the quality of bank loans is stable and the risk resistance ability is sufficient, which is expected to be able to resolve the risk caused by the default of credit bonds.

In this regard, the conclusion of external analysis is more consistent. Dai Zhifeng, head of China Thailand securities finance group, said: on the one hand, the transmission of the impact of credit debt default on bank asset quality is limited, and the stock and incremental risk are completely controllable; on the other hand, the proportion of on balance sheet investment credit debt is less than 3.5%, and the off balance sheet risk appetite is reduced. Wang Yifeng, chief analyst of Everbright Securities and finance industry, said that the proportion of on balance sheet credit debt allocation of commercial banks is low, and the weakening of credit bonds will cause valuation profit and loss to a certain extent, but it will not have a great impact on asset quality.

Since 2016, China research and Development Co., Ltd. has maintained a low level of non-performing loans of around 1.5% in China research and Development Bank. At present, most of the banks have made a thorough exploration of corporate loans. About 10% of the coal industry loans are included in the concerned loans. At the same time, the investment risk control of banks on and off the balance sheet is consistent. CICC said in the research report, so we judge that the exposure related to credit debt is also declining, and the risk is controllable.

How about bank financing? According to the 2020 China Banking financial management business development report 2020 released by the China Banking Association, bonds accounted for the highest proportion of all kinds of assets invested by non breakeven financial management funds, reaching 59.72%, an increase of 6.37 percentage points compared with the beginning of the year. According to Yang Chao, an analyst at Puyi standard, compared with public funds and securities companies asset management products, the proportion of banks financing investment in low-grade corporate credit bonds is relatively low, and the underlying asset risk is relatively controllable. Therefore, the downward interest rate caused by the rise of credit bond market risk has little impact on bank financial management income; on the other hand, the fluctuation of enterprise credit bond market is affected by a single event The scale of default accounts for a small proportion of the whole bond market, and the impact on bank financial management is also very limited.

Strengthen the ability of credit risk monitoring and control

The financial commissions zero tolerance attitude towards evasion and abandonment of debts sends a positive signal to the market. On November 23, the relevant person in charge of Jizhong Energy said, please rest assured of the financial market. Jizhong energy group strictly abides by laws and regulations and market rules, adheres to professional ethics, is diligent and responsible, and is honest and trustworthy.

The perfection of market rules and order will be beneficial to the control of market credit risk. Industry insiders believe that the market is mainly concerned about the banks position exposure in credit bonds. The statement of the financial commission and the follow-up actions of some local governments are conducive to stabilizing market expectations and sentiment, thus reducing potential risk exposure. In addition, the behavior of evasion and abandonment of debt will converge and the impact on the market will be reduced accordingly.

But even so, it must be stressed that banks should take the initiative to actively manage the bond investment strategy and incline to low-risk bonds in a timely manner, and at the same time, they should also take the warning brought by this incident seriously.

On November 19, the association of dealers once again announced that it would launch a self-discipline investigation on relevant intermediaries of debt financing instruments of Yongmei holdings. According to the association, it was found that the main underwriters such as industrial bank, Everbright Bank and Zhongyuan bank, as well as China integrity international and Xigema accounting firms, were suspected of violating the self-discipline management rules of the inter-bank bond market. The meeting also stressed that 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.

In terms of asset allocation, this credit default event has also sounded the alarm bell for banking institutions. Yang Chao believes that, on the one hand, banking institutions need to strengthen the investigation of credit bonds already invested in the banks, maintain a prudent attitude towards the credit bonds of some enterprises with weak qualifications, pay more attention to the risk transmission of individual cases, and pay attention to the willingness of the main body to bear debt when the qualification sinks. The behavior of some small and medium-sized banks to obtain high-yield products through credit sinking and then expand market share will be restricted to a certain extent. Bank financing funds may be concentrated in interest rate bonds and medium and high-grade credit bonds with more stable finance. On the other hand, bank financial management funds also need to consider more diversified investment to diversify investment risks, gradually transform to large asset allocation and portfolio management, and further explore the allocation scheme with standardized asset investment as the main and non-standard asset investment as the auxiliary. In this regard, Qiao Hongjun, President of the financial market business center of Bank of communications, wrote that as an investor in the credit bond market, he will adhere to the concept of value investment, focus on cultivating the ability of credit risk identification and prediction, strengthen the ability of credit risk monitoring and control, optimize the credit risk management process, and boost investment confidence by refining credit pricing and transaction level. Source: surging news editor: Chen Hequn_ NB12679

In terms of asset allocation, this credit default event has also sounded the alarm bell for banking institutions. Yang Chao believes that, on the one hand, banking institutions need to strengthen the investigation of credit bonds already invested in the banks, maintain a prudent attitude towards the credit bonds of some enterprises with weak qualifications, pay more attention to the risk transmission of individual cases, and pay attention to the willingness of the main body to bear debt when the qualification sinks. The behavior of some small and medium-sized banks to obtain high-yield products through credit sinking and then expand market share will be restricted to a certain extent. Bank financing funds may be concentrated in interest rate bonds and medium and high-grade credit bonds with more stable finance. On the other hand, bank financial management funds also need to consider more diversified investment to diversify investment risks, gradually transform to large asset allocation and portfolio management, and further explore the allocation scheme with standardized asset investment as the main and non-standard asset investment as the auxiliary.