The recent credit bond default events have triggered certain market volatility. Since banks are the largest holding institutions in the bond market, their impact has also attracted widespread market attention.“The allocation of bonds is an important business of the bank, but recent credit bond-related incidents have not had a negative impact on the Bank of Nanjing. First, the allocation of bonds by the Bank of Nanjing is mainly treasury bonds, national policies and state-owned bank bonds. Such bonds are the most secure financial assets in China. Secondly, the Bank of Nanjing not only has an excellent bond asset management team, but also has been doing a regular and prudential risk control.” Said at the meeting.
According to the “Financial Times” reporter, because the overall default rate is not high, the recent defaults of credit bonds have limited overall impact on banks. Experts also believe that after the turmoil, the belief in “Guangdong” has been further broken, which will not only facilitate the orderly clearing of risks in the bond market, but also promote more market-oriented risk pricing, which will further promote bank investors to improve their investment research ability.
Overall risk controllable
Limited impact on banks
“Look at credit debt default rationally.” Zeng Gang, deputy director of the National Finance and Development Laboratory, emphasized in an interview with a reporter from the Financial Times.
The recent occurrence of credit debt defaults represented by Brilliance Auto, Ziguang Group, Yongcheng Coal and Electricity Holdings Group, etc. has triggered a certain market disturbance. After the default of high-credit bonds, banks, as the largest holding institutions in the bond market, have received widespread attention and discussion.
The interviewed experts analyzed that, as an unsecured fixed-income debt instrument, credit debt is similar in nature to bank credit loans. Affected by the adjustment of the overall economic structure and the outbreak of the epidemic this year, it is expected that some bonds will have credit risk. At the same time, in terms of the proportion of default bonds in the entire issuance balance, it is still far lower than the bank’s bad credit, and the overall risk is under control.
“Compared with previous years, the number and scale of defaults on credit bonds have not risen significantly since the beginning of this year. It is still a normal credit risk performance. Although banks hold a lot of credit bonds, the overall default rate is not high, so overall The impact on banks is limited.” Zeng Gang said.
According to statistics from the Zheshang Securities Research Report, as of November 2020, a total of 110 bonds have defaulted, with a default amount of approximately 126.283 billion yuan. The default amount is similar to the same period last year, but 23 of them have defaulted for the first time, compared with the same period in 2019. 37 companies have declined.
At the same time, in the view of Wang Yifeng, chief analyst of the financial industry at Everbright Securities Research Institute, commercial banks, especially state-owned banks, have stricter entry thresholds for the allocation of credit debt, subject, region, and industry. The rating requirements are generally AAA, and credit The increase in stratification is more reflected in the widening of low-rated bond spreads, which is not expected to have much impact on commercial banks.
Experts generally believe that the recent volatility of the credit bond market is more due to the nature of the state-owned enterprise of the default subject, which broke the previous “state-owned enterprise belief” in the market and formed a short-term impact on subsequent market confidence. However, because the current overall default level is within the normal range, coupled with timely voices from the regulatory level, it plays a positive role in stabilizing the confidence of market entities. In the short term, market panic will be alleviated and gradually return to rationality.
“The timely voice of the Financial Committee is conducive to stabilizing market confidence.” Feng Lin, a senior analyst at Oriental Jincheng Research and Development Department, said, “It is foreseeable that the default risk of large local state-owned enterprises will be effectively controlled in the short term, and market sentiment will gradually return to rationality. Improvements are expected to occur. Considering that there are more individual bonds that were’wrongly killed’ in the early stage, there is room for investors to play; for issuers, the intensive cancellation of the first-level issuance of new bonds will also be alleviated, which also means Therefore, it is very unlikely that default events will spread due to difficulties in refinancing and cause systemic credit risk.”
“Gangdui” faith no longer
Promote investors to improve their investment and research capabilities
Experts generally believe that the subject of default has spread to state-owned enterprises, which has a positive effect on correcting some of the so-called “state-owned enterprise beliefs” in the past bond market, further promoting institutional investors’ ability to improve investment research, and further enhancing risk awareness in the bond market .
“Since last year, the short-term market has indeed experienced shocks from the breaking of beliefs in urban investment to the breaking of beliefs in state-owned enterprises. However, in the medium and long term, every breaking of belief is beneficial to the pricing and structural optimization of the bond market. There should not be the so-called’just redeeming’ belief.” said Wu Jialu, a macro analyst at Zhongtai Securities.
Feng Lin, a senior analyst in the research and development department of Oriental Jincheng, also believes that breaking the “rigid exchange” itself is conducive to the orderly clearing of bond market risks and is also conducive to promoting more market-oriented risk pricing. It is the only way for China’s bond market to mature.
This means that the long-standing credit pricing bias is gradually being corrected. As an important investor in the bond market, how should the banking industry avoid risks in this process?
“Banks, as investors, must further strengthen their risk awareness and correct some distortions in past pricing. In fact, under some of the so-called’state-owned enterprise beliefs’ in the past, some investors did not form effective judgments on the true situation of the enterprise, which deviated from the actual credit Risks are priced to make the original intention of investment decisions.” Zeng Gang believes.
“Financial Times” reporter interviewed and learned that, from the current point of view, once credit debt defaults, banks may have some technical difficulties in the practice of write-off and disposal. Therefore, it is very important for banks to prevent risks from the access link.
“On the one hand, we must start from the investment side, strengthen investment research capabilities, and establish strict access standards; on the other hand, we must strengthen research, investigation and tracking of companies during the bond’s existence, and timely discover risks and prevent them. When there are signs of default, risk management should be carried out in advance through market transactions.” Zeng Gang suggested.
“Banks need to strengthen the risk screening of currently invested bonds, especially for companies with weaker regional economic strength and frequent risk events in the industry. In addition, bank funds must also fully consider diversified investment to diversify risks, and gradually Transformation to large-scale asset allocation and portfolio management.” said Li Qian, assistant general manager of the financial business department of Oriental Jincheng.
Supervision emphasizes maintaining the basic order of the market
Warn underwriters to regulate underwriting behavior
In addition to participating in bond transactions as investors, many banks also play an important role as an underwriter in the underwriting process of bond issuance. After the bond default storm occurred, the Association of Dealers launched a self-discipline investigation of relevant underwriters. Experts in the industry believe that the breach of contract has warned the underwriters in the future. From the perspective of the underwriting process, underwriters need to further solidify their due diligence obligations and verification responsibilities, while regulating the issuance behavior.
“Although it is normal for credit risk to occur, when it comes to specific cases, if there are some violations of regulations during the issuance process, in particular, some underwriters did not bear due responsibilities resulting in insufficient information disclosure or deliberate manipulation. As a result, some entities that do not meet the qualifications for issuing bonds have issued bonds, or the issue price does not match the issuer, then the underwriter should bear the corresponding responsibility.” Zeng Gang said.
“If the underwriters have insufficient due diligence, lack of risk control checks, insufficient information disclosure in order to ensure the issuance, and pricing that does not truly reflect the company’s situation, it is very easy to plant hidden dangers for the underwriting of the defaulted bonds. In addition, underwriting If there are more defaults on the company’s bonds, it will also have some adverse effects on the company’s ability to expand its business and brand effect.” Wang Jianhui, a senior analyst in securities business, emphasized, “When some systemic factors are unavoidable, the underwriters will pay It should be more detailed in industry research, understanding of the macro situation, and investigation of business activities.”
The Financial Commission of the State Council emphasized at a recent meeting that various market entities such as bond-issuing companies and their shareholders, financial institutions, and intermediaries must strictly abide by laws, regulations and market rules, adhere to professional ethics, be diligent, honest and trustworthy, and effectively prevent moral hazards. .
Experts believe that in the coming period of time, the regulatory level will continue to maintain the basic order of the bond market, including severely cracking down on malicious evasion of debt, and at the same time strengthening the standardization and compliance management of intermediary behavior. In order to promote the high-quality and healthy development of the bond market, industry experts suggest that in the future, the bond credit default resolution mechanism needs to be further improved at the policy level in order to better protect the rights and interests of investors and give play to the active role of the factor market in resource allocation.
“From the perspective of the development of the bond market since 2019 and the economic and financial situation after the epidemic, the normalization of default events may be a long-term trend in the development of China’s credit bond market. From the current point of view, the channels for handling credit bond defaults have been further explored The corresponding disposal system can be further improved, including promoting the interconnection of the bond market, unifying regulatory standards; improving the bankrupt management system, and improving the bond trustee system. In addition, the supervision and enforcement of diversified payment behaviors must be strengthened.” Zeng Gang said.
article links：What happened to the banks after the credit default?
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