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The development of the corporate bond market to promote business restructuring of commercial bank assets

Author: ChenMin From: www.yourpaper.net Posted: 2009-04-01 13:28:02 Read:
Abstract: the development of the corporate bond market has brought the "crowding out" increasingly apparent quality large enterprises began to make more use of the bond market to finance gradually decreased dependence on bank credit funds, commercial banks, large enterprises as the main The service object credit markets began to face the situation gradually narrowed. Commercial banks must speed up asset business restructuring for SMEs, to provide financing services for small and medium-sized enterprises; to external market pressures into the internal driving force for development, by strengthening the mechanisms and institutional innovation, and effectively improve the level of risk management, further improvement and improve financial services for SMEs.
Keywords: corporate bonds, small and medium enterprises, financing, commercial banks in transition

In recent years, with the gradual deepening of China's reform of the financial system, the maturing of financial laws and regulations, financial assets has expanded each year, more diverse financial institutions throughout the financial markets to achieve a smooth, specification development. In the development process, some of the structural problems in the financial markets is gradually revealed, especially direct financial development of the backward and difficult to fully meet the funding needs of SMEs relative prominence phenomenon, caused widespread concern of the social and regulatory authorities. How to steadily expand direct financing channels, optimize the structure of financial assets, and to promote the common development of all types of financial market players, including SMEs, and has become an important issue we face one.

A "crowding out" effect brought about by the development of the corporate bond market will force commercial banks to directly face the SME customers

The development of our direct financial backwardness hinder the construction of a multi-level financial markets, increasing the difficulty of SME financing. With the People's Bank in 2005 launched the short-term financing bills and the 2006 stock market recovery financing function of the imbalance in the development of direct financing situation eased, but still significantly higher proportion of indirect financing. 2005 domestic non-financial sector stocks, government bonds, corporate bonds and other direct financing of the new scale of 689 billion yuan, accounting for 19.8% of the total financing, including the rapid development of the corporate debt, the annual volume of financing of 201 billion yuan, The proportion rose to 6.6% from 1.1% in 2004. The new scale of direct financing through stocks, government bonds, corporate bonds in the domestic non-financial sector in 2006 was 718.7 billion yuan, accounting for 18% of the total financing. Led commercial banks, the indirect financial accounting absolute proportion of the financial market system, enterprises lack the self-adjustment ability to adapt to changes in the market, easily lead to the economic structural adjustment costs largely borne by the banks, which brought the banks' bad a substantial increase in credit assets. In this context, the commercial banks out to avoid risks and maximize the return on the need must be business development focus on risk is relatively small, relatively high quality large quality enterprises, to form a high-quality customer base excessive business competition, while ignoring the situation of the financing needs of SMEs. Direct financial underdevelopment, one of the important reasons for the financing of SMEs. The development of direct financing "crowding out" will force commercial banks must directly face the SME customers, the development of SME loan business will become the urgent requirement of commercial banks in their own development.

Traditional corporate finance theory suggests that the, enterprise replenishment demand channels generally follow the sequence of endogenous financing - debt financing - equity financing. From the experience of the United States from the 1965-1982 period, the total financing of U.S. non-financial corporate internal accumulation accounted for 61% of the average debt financing accounted for 23% of the newly issued shares on average accounts for only 2.7% per year. The data indicate that, to raise the proportion of direct financing, relying solely on equity financing is not enough, we must vigorously develop the corporate bond market, in order to reduce the financial risk of the banking system. From the 1990s onwards, Japan and South Korea have gone through the process of the corporate bond market is booming, the stock of bank credit decreased. Japanese companies scale of direct financing through the bond market in the 1994 - 2004 decade from 45 trillion yen to 80 trillion yen, an increase of nearly double the credit balance of the banking system over the same period fell from 430 trillion yen to 260 trillion yen. The development of the corporate bond market, crowding out the scale of the banking system's credit. In South Korea, the corporate bond market and the size of bank credit also exists the shift in the "crowding out" phenomenon. After the Southeast Asian financial crisis in 1998, the South Korean government has stepped up efforts to restructuring of the banking system has been the rapid development of the corporate bond market. Size of the corporate bond market to grow from 90.1 trillion won in 1997 to 153.3 trillion won in 2004, the amount of private enterprises financing through the bond market in the proportion of the total debt rose from 16.7% in 1997 to 2001 21.7%. Crowding out of bank credit business, the development of the corporate bond market, on the one hand effectively broadens the direct financing channels, to reduce the accumulation of financial risks to the banking system; the other hand, the size of credit compression also makes the profit margins of commercial banks increasingly small commercial bank risk management and market competition and increasing awareness.

The development of the corporate bond market will also change the main customer base of commercial banks to fundamentally change the operational behavior of commercial banks. As the corporate bond market generally has a more complete corporate bond rating and information disclosure system, high barriers to entry, the overwhelming majority of countries in the corporate bond market are mainly large quality enterprises to obtain direct financing services. Korean corporate bond market, for example the corporate debt market size in 1997 and 2004, South Korea's development from 90.1 trillion won to 153.3 trillion won, up 70%, while the same period in Korean SME financing in the bond market on the scale never exceeded 5%. Financing and duration of the corporate bond market is relatively flexible, relatively low-cost financing, large-scale high-quality companies tend to issue bonds to cover short-term funding needs of the commercial banks. The one hand, the proportion of bond financing in the the Total corporate finance in 1997 and 2001, the South Korean private sector bond financing scale from 121.3 trillion yuan to 179.9 trillion yuan, an increase of 48%, bond financing in the total amount of financing rising in the proportion increased to 21.7% from 16.7%. On the other hand, bond financing to meet the needs of corporate liquidity trend is increasingly evident. From the point of view of the financing structure of the Korean companies, the total bank loans and the proportion is still rising, but the increase is lower than the growth rate of bond financing. The size and proportion of the bill financing a marked decline, indicating that some of the short-term financing needs of Korean companies significantly by bond financing alternative. This can be proved from the Korean corporate bond issuance purposes. Korean corporate bonds in 1997-2004, 66.7% used to supplement working capital requirements, and only 31.2% for investment in fixed assets. The Korean Experience shows that the development of the corporate bond market will be a significant reduction in the demand for bank liquidity, and medium and long-term bank loan business has brought some impact.

From the reality of our situation, when large quality enterprises began to use the bond market to finance the dependence on bank credit funds will gradually decline, the traditional commercial banks, the credit markets will serve primarily to large enterprises facing forward to the gradual narrowing of the situation prevalent excess liquidity, higher loan-to-deposit ratio is low and the resulting yield of the assets and capital interests gradually emerging. At the same time, the WTO after the protection period is coming to an end, and the interest rate market acceleration intensified competition in the banking sector will also bring forward more intense competition for large enterprise customers, the commercial banks will face the pressure of large customers narrowing net interest margin, interest income decreased . The new situation requires commercial banks must be out of the traditional business, traditional market circles, must further for SMEs, to provide financing services for small and medium-sized enterprises. With the development of Chinese enterprises short-term financing bills market, crowding out of direct financing has been gradually revealed. As of the end of 2006, a total of 210 enterprises in the national inter-bank bond market, the issue of short-term financing bills of 321, the total issue size of 434.38 billion yuan. This part of the vast majority of funds for repayment of short-term bank borrowings. It can be expected, as the corporate bond market, long-term product launches, corporate direct financing will be commercial banks traditional business much greater impact, the crowding-out effect brought about changes in the structure of financial markets will be more significant.
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