After over ten months of soliciting opinions, the new version of the securities broker risk control index adjustments have officially been implemented.
Recently, the China Securities Regulatory Commission (CSRC) issued the revised "Regulations on the Calculation Standards of Risk Control Indexes for Securities Companies" (hereinafter referred to as the "Risk Control Index Regulations"), which will officially come into effect from January 1, 2025.
The adjustments to the "Risk Control Index Regulations" include: optimizing the calculation standards for risk control indexes of securities companies' investment in stocks, market making, and other businesses; optimizing the classification adjustment coefficients of risk control indexes, appropriately adjusting the risk capital reserve adjustment coefficients and the conversion coefficients of total on- and off-balance sheet assets for securities companies that have been in the top classification evaluation for three consecutive years, and differentially enriching the available stable funds.
A non-bank analyst from a securities company told First Financial that the optimization of the risk control index system has its positive significance, allowing high-quality securities companies to relax capital restrictions.
The adjustment of the classification supervision standards has a limited short-term impact, but it will have a greater impact on high-quality securities companies when the economic recovery accelerates.
Another listed securities company insider believes that classification supervision tests the continuous operation ability of securities companies.
In the long run, the gap between top-quality securities companies and others will widen, forcing other securities companies to improve their differentiated operation capabilities.
Looking specifically at the relaxation of risk control indexes for investment in stocks and market making, this adjustment mainly involves six tables: the net capital calculation table, the risk capital reserve calculation table, the total on- and off-balance sheet assets calculation table, the liquidity coverage ratio calculation table, the net stable funding ratio calculation table, and the risk control index calculation table.
The main content of the adjustment includes four aspects: improving business measurement standards, optimizing classification measurement, enhancing the completeness of the index system, and strengthening capital constraints.
In terms of promoting the function, the "Risk Control Index Regulations" mainly optimize the calculation standards for risk control indexes of securities companies' investment in stocks, market making, and other businesses, further guiding securities companies to give full play to the functions of long-term value investment, serving the financing of the real economy, and serving the wealth management of residents.
For example, from the adjustment of the risk capital reserve calculation table, the risk capital reserve calculation coefficient for the main index constituent stocks and general listed stocks is reduced from 10% to 8% and from 30% to 25%, respectively, and the proportion of main index constituent stocks included in high-quality liquid assets is increased from 40% to 50%.
At the same time, the risk capital reserve for market-making business is relaxed, and a new provision is added: "Securities companies carry out market-making business, and the market risk capital reserve for financial assets and derivatives held in the market-making account is calculated at 90% of each calculation standard."
A securities investment insider said that optimizing the risk control standards for investment in stocks and market-making business is conducive to securities companies increasing their investment in A-shares and other equity assets, and playing an active role in the capital market through market-making business.
However, for securities companies, whether the funds released by relaxing capital restrictions can enter the market still depends on the investment environment and the company's own investment strategy.
The aforementioned non-bank analyst also believes that the optimization of the risk control index system allows high-quality securities companies to relax capital restrictions and participate more in the capital market investment, which can promote incremental funds to enter the market in the long run.
However, under the current market environment, the motivation for securities companies to accelerate their entry into the market will not be too great, and the return on capital is uncertain.
Securities companies with risk control indexes close to the warning line are expected to benefit from regulatory guidance.
This "Risk Control Index Regulations" highlights comprehensive coverage, prudent and strict, and strengthens risk management and promotes the function.
It includes optimizing classification measurement, appropriately adjusting the risk capital reserve adjustment coefficient and the conversion coefficient of total on- and off-balance sheet assets for securities companies that have been in the top classification evaluation for three consecutive years, differentially enriching available stable funds, and supporting high-quality securities companies to moderately expand their capital space.
Since the CSRC revised and issued the current risk control index calculation standards for securities companies in January 2020, after more than four years of practice, the four core risk control indexes of the securities industry, risk coverage rate, capital leverage ratio, liquidity coverage ratio, and net stable funding ratio, have long been maintained at 1.5 to 2.5 times the regulatory standard.
"In the first half of 2024, the risk control indexes of securities companies have slightly improved but are still tight.
After this round of revision, high-rated securities companies with risk control indexes close to the warning line are expected to benefit more."
Fangzheng Securities non-bank team analysis said that in the first half of the year, except for the slight decline in the liquidity coverage ratio of the listed securities company risk control index, other indexes have shown an improving trend; the average risk coverage rate is 276%, an increase of 13 percentage points from 2023; the net stable funding ratio is 166%, an increase of 9 percentage points from 2023; the capital leverage ratio is 22.1%, an increase of 1.4 percentage points from 2023; the liquidity coverage ratio is 300%, a decrease of 8 percentage points from 2023.
However, against the backdrop of the slowdown in equity financing of securities companies, some top securities companies still have risk control indexes close to the warning line and are expected to benefit from the optimization of the risk control index calculation standards.
The Fangzheng Securities non-bank team analysis believes that the optimization of the risk control index system, moderately relaxing the capital constraints on top securities companies, and further improving their use of the table level, will promote the Matthew effect of the securities industry and accelerate the supply-side reform.
This adjustment conforms to the previous regulatory guidance, further enhancing the competitive advantage and professional ability of top securities companies in assisting the construction of a financial power, and it is expected that the subsequent top securities companies will further optimize and strengthen through mergers and acquisitions and other means, and promote the acceleration of industry supply-side reform.
The aforementioned securities company insider said that from the classification standard, it mainly revolves around the classification evaluation to divide securities companies into three categories: continuous three years of Class A AA level, continuous three years of Class A A level, and other "three levels".
The capital constraints required for each category of securities companies are different, and the space for high-quality securities companies to expand their business scale is broadened, and the profit scale can also be expanded accordingly.
On the contrary, other securities companies have limited capital space, and their business scale and profit space will be separated from high-quality securities companies.
However, in the view of the aforementioned non-bank analyst of securities companies, the scale effect is mainly reflected in credit business, and there is no significant positive correlation between the performance and scale of investment business.
It may be that the larger the investment scale, the more difficult it is to adjust when the market style changes, and the worse the returns.
(Note: This translation is an attempt to capture the essence of the original text, but due to the complexity and length of the content, some nuances may not be fully conveyed in the English version.)
