Securities Companies' Corporate Debt Capacity Evaluation Next Year To Start A New Regulation, Sword Means "Price War"

The corporate bond business of securities companies has come up with evaluation standards.

In October 18th, the Securities Association of China (hereinafter referred to as the China Securities Regulatory Commission) issued the evaluation method of securities company's corporate bond business competence (Trial Implementation) (hereinafter referred to as the "evaluation method").

The China Securities Regulatory Commission said that the move is aimed at promoting the ability and quality of corporate bond business and enhancing the effectiveness of corporate bond business risk control. At the same time, the first assessment of the practice of corporate bond business of the securities company will start in 2020.

In fact, the phenomenon of "price war" underwritten by bond dealers has triggered the attention of regulators for many times, and the SFC has made a statement that it will conduct on-site inspections of such projects.

"In the early stage of the introduction of the appraisal system of the professional competence, the regulatory authorities had consulted on these issues last year, and the risk of bond default has been increasing over the past two years. In October 21st, a senior brokerage underwriter in Shanghai said.

Set up five indicators

The evaluation method shows that the evaluation indicators for securities company's bond business practice ability include five basic indicators, such as securities company's corporate bond basic guarantee ability, corporate bond business capability, corporate bond compliance development capability, corporate bond project risk control effectiveness and service national strategic power.

These five indicators are mainly concerned with the system construction and staffing situation of the company's corporate bond business; the scale and market influence of the business; the standardization of the operation of the business; the risk control of the front end underwriting risk and the back-end trustee management; and the contribution to the national strategy.

Compared with the previous draft, the proportion of the five indicators in the overall score is 20%, 30%, 20%, 20% and 10% respectively. Corporate bond business capability is the highest proportion.

"The evaluation method will weaken the excessive attention to the scale, and the indicators will be more comprehensive. The comprehensive assessment of the practicing ability of the securities companies will also urge the industry to pay attention to the risk control and compliance of the bond business and prevent risks." A bond broker of a large brokerage firm in Beijing pointed out.

CFA also pointed out that since the implementation of the "management and issuance of corporate bonds", the issuance process of corporate bond issuance has been further simplified, the exchange bond market has grown rapidly, and the ability to serve the real economy has been greatly improved. But at the same time, the substantial change of audit philosophy and market scale also requires that the underwriting institution must comprehensively enhance its practicing ability, strengthen its compliance with wind control, and fulfill the duty of "gatekeeper" conscientiously.

"On the one hand, the scale of corporate bond business is gradually expanding. On the other hand, bond underwriting business is now an important part of the whole brokerage business. Because the cycle of bond underwriting business is short and profits can be quickly realized, two or three years ago, this part of the business was quite a blue ocean, and the competition was smaller, so all the vouchers were very clear. In this case, it is necessary to regulate the whole market. " Shen Wan Hongyuan securities Deputy General Manager of fixed income headquarters fan told the twenty-first Century business reporter.

In fact, before the bond underwriting market was similar to the "price war" chaos frequent. For example, in a tender bid for a ten billion scale corporate bond, a broker offered a bid price of as low as 10 thousand yuan for the underwriting cost, which made the market surprise while the vicious competition in the corporate bond business also came to the stage.

"In the course of the development of the industry, there are not only the Underwriters' underwriting situation, but also the situation that they do not accept the underwriting fee or take the project through various financial advisers. These problems are urgently needed to be standardized." The aforementioned bond underwriters said.

Limited price war

In view of all kinds of irregularities, the China Securities Regulatory Commission has also made certain guidance in the evaluation method.

For example, in the corporate bond business capability index, there are three sub indicators: corporate bond business income index, corporate bond main underwriting project index and corporate bond underwriting index.

Specifically, in the 30 points of the corporate bond business capability index, the corporate bond business income index is full score of 15 points; the number of corporate bond main underwriting projects index is 8 points; the corporate bond underwriting amount index is 7 points. The proportion of income indicators is half.

"This will lead the market to avoid vicious competition to grab the project, and the price war will improve to a certain extent." Fan said, "in the whole evaluation method, bond business income has also become an important indicator, and the previous evaluation is just the ranking of the examination scale, and the income has not been considered as an index."

"Now when income is added as a new indicator, there will be a certain degree of containment to this kind of purely through price war to get the project. In addition, the regulators also have penalties for low price quoted brokerages, and combined several ways will also reduce such situations." Fan pointed out.

In April this year, the Guangdong Securities Regulatory Commission publicized a penalty for GF Securities, and called for the correction of GF Securities. Guangdong securities regulatory bureau pointed out that GF Securities undertook a bid to participate in corporate bond projects at below cost, violating the provisions of the seventh and thirty-eighth rules for the issuance and trading of corporate bonds.

This is also the first corporate bond "price war" ticket issued by regulators.

"If an industry wants to achieve orderly development, such dumping behavior can not exist, otherwise it will destroy the sustainability of the whole industry. If a broker wants to get too low a price for a project, the follow-up service will not keep up with it, including procedural management, risk control and so on, which is unfavorable for the development of the industry. A large brokerage firm analysts said.

With the constant regulation of the market, chaos will also be contained.

"Before the regulators increased penalties, the price war, the market has also improved. People will not say direct quotations or give low quotations. Basically, there is a cost consideration to cover costs. But the market still needs further regulation. " A brokerage firm in Shanghai told the twenty-first Century economic news reporter.

"If the market expands in disorder, the risk will accumulate more." Fan pointed out that "now classified rating, the project will be more concentrated in the big brokerages, the industry in the future will further focus on the securities business of the head. Comparatively speaking, the risk control of large brokerages will also be more stringent, which is helpful for risk control and risk prevention in the whole market.