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The development of the corporate bond market in China and its impact on commercial banks

Author: ZhaoXinJie From: www.yourpaper.net Posted: 2009-04-01 21:41:34 Read:
[Abstract] This paper asked the following view of China's corporate bond market history and reality: the development of the corporate bond market to help commercial banks to optimize the portfolio and enhance the return on assets and liquidity, help to improve the level of commercial bank interest rate pricing and enhance the stability of the banking system. At the same time, the development of the corporate bond market so that commercial banks face more complex credit risk and market risk. Interaction and impact of credit risk and market risk, a risk "zoom" effect. Based on the above analysis, the paper argues: Commercial banks should clearly understand the advantages and disadvantages of positioning from the perspective of the development strategy for the corporate bond business, one of the priorities of the corporate bond business as a comprehensive competitive banking industry after WTO; commercial banks should build a corporate bond business comprehensive risk management framework, including credit risk, market risk; commercial banks should strengthen research on corporate bonds innovative products.
[Keywords] corporate bonds; corporate bonds; commercial banks; interest rate risk
Since 2005, the short-term financing bonds, and asset-backed securities, and other direct financing tools of the business of commercial bank credit is starting to show. The concern is that the corporate bond market has slowly developed over the years there have been signs of accelerated development, both from international experience and domestic trends, opportunities and challenges of the development of the domestic corporate bond market commercial banks will. Therefore, an accurate grasp of the context and dynamics of the development of the domestic corporate bond market, in-depth study of its possible impact on commercial banks, and is of great significance.
A historical analysis of the development of China's corporate bond market
China's corporate bond market is gradually standardized under government supervision departments to strictly manage the development of direct financing market. The control limits and interest rates on corporate bonds issued in the course of development of the corporate bond market, the regulatory authorities, poor overall corporate credit situation and the level of financial development is relatively backward to be the main factors restricting the development of the corporate bond market.
(A) of corporate bonds and corporate bonds definition
In accordance with the provisions of corporate bonds issued in 1993 Management Regulations "(hereinafter referred to as the" Regulations "), the bonds are corporate bonds issued by the enterprise legal person established within the territory of the People's Republic of China in accordance with the law. On this basis, if the issuer also satisfy the conditions for the issuance of corporate bonds in the Companies Act, that the issuer is legally established as a joint stock limited company, the state-owned companies and state-owned enterprises in more than two or more than two other state-owned investment The main set up a limited liability company, the issue of corporate bonds are corporate bonds.
Defined point of view, from the concept of the debtor promised repayment of principal and payment of interest in accordance with the prescribed interest rate at a specific period in the future, corporate bonds and corporate bonds, both of which belong to the enterprise legal issue debt covenants. But strictly speaking, corporate bonds and corporate bonds is not the same, a wider range of corporate bonds included, including not only corporate bonds issued include bonds issued by non-corporate. View of the concept of corporate bonds is more in line with the actual situation of the development of China's financial market, this report will focus on corporate bonds to expand the analysis and discussion. In theory, financial bonds issued by commercial banks also belong to the category of corporate bonds, financial bonds has its own particularity, therefore not included within the scope of this study.
(B) a brief review of the development of the bond market
Corporate bonds (including short-term financing bonds) market development can be summarized into three stages: the first stage for the 1984-1994 year, the founding of the corporate bond market and the revamping of. "The corporate bonds Provisional Regulations" (hereinafter referred to as the "Provisional Regulations") promulgated in 1987, the rapid growth of corporate bond issuance, and the climax of a debt issuance in 1990-1992 year corporate bonds issued in 1992 amounted to 68.4 billion yuan much higher than originally planned issue size (Wang Tiefeng, 2005). However, at this stage, corporate bond issuance lack of effective constraint enterprises to issue more bonds mixed, some local governments also use corporate bonds disguised form of fund raising, collecting funds is more prevalent.
The second stage, from 1995 to 2003, Corporate Bond Management Ordinance "enacted in 1993, the operation of the corporate bond market gradually standardized, but because of the regulatory authorities to take the quota management and approval system management approach, market development is slow. In accordance with the provisions of the Ordinance, the main issue of this period of corporate bonds expanded to the enterprise legal person established within the territory of the People's Republic of China in accordance with the law ", but in fact the main issue for the vast majority of the energy, transportation, communications, important raw materials, as well as urban infrastructure and other national key projects, such as: Gap project (more than 11 billion yuan), railway construction (more than 18 billion yuan), less ordinary corporate bond issuance. With the perfection of the legal system and market gradually standardized, the investment entity of the corporate bond market gradually shifted from individual investors to institutional investors based. Corporate bonds have also been allowed in Shanghai and Shenzhen stock exchanges, corporate bond liquidity improved.
The third stage since 2004. In 2004, the People's Bank of China issued a "national inter-bank bond market, bond trading the circulation auditing rules" the official circulation of corporate bonds in the interbank market to provide a basis. People's Bank which approved the seven corporate bonds into the inter-bank bond market trading circulation, change the status of corporate bonds listed on the exchange market, single transactions. In 2005, with the "floodgates" of corporate short-term financing bonds, the corporate bond market bright. Corporate Bond Management Ordinance amendment after 6 years, is also expected to be introduced in 2007, the coming of the "golden period" of the corporate bond market.
(C) the corporate bond market development inherent contradictions
From financing order theory, corporate bonds, bank loans incomparable advantages. First, corporate bonds, as a standardized securities, stock exchange and over-the-counter market transactions, their mobility is much higher than generally only through securitization of credit assets of commercial banks (commercial bank credit assets sold on the open market). Second, due to the corporate bond market is a creditor, the debtor and brokers "bargaining" and the formation of a common binding market, require regular disclosure of all aspects of information for market decision making, and therefore better than commercial banks in the area of ??information symmetry . Third, corporate bonds have the dual properties of credit instruments and market investment tools, its interest rate decision factors include the real economy, supply and demand, and financial market trends, the level of interest rates to better reflect the true price of the capital market. From an international point of view, many of the developed economies, bond market financing is generally the amount of the financing of the stock market a few times, in the enterprise exogenous financing, corporate bonds, the amount of financing exceeding several times the amount of equity financing.
In our country, the size of the corporate bond market is much smaller than the scale of bank credit and stock markets, the system construction is lagging behind, always in a subordinate position (see Table 1) in the financing system and the structure of corporate finance. Overall, do not conform to the reality of China's corporate bond market, with the theory and the experience of developed countries, and the main reason is that Chinese enterprises generally poor level of credit as well as regulatory authorities enterprises excessive administrative intervention. Therefore, an effective solution to these contradictions is the key to promoting the development of the corporate bond market.

Chief of interest rate controls and corporate bonds issued for a period and long-term oriented. To circumvent the high interest rates to solicit depositors "phenomenon, promulgated in 1993," the provisions of the Ordinance, the interest rates for corporate bonds issued shall not exceed 140% of the same period in bank savings rate. To attract investors, corporate bond issuance interest rates tend to be given to the provisions within the ceiling, which may lead to different risk corporate bond pricing convergence phenomenon, resulting in risk-benefit serious asymmetry (Yuan East, 2004).
Corporate bonds issued in the 2001 period, mainly in short-term within 1-3 years, to 2001, some companies began to issue after a period of more than seven years of fixed-rate bonds, corporate bonds issued for a period of the medium-and long-term trends. The main reason is that, since 2001, the stability of the macro-economic growth and constantly enhance smaller inflation pressures, financial system, interest rates remain low, corporate bonds and notes issued in order to avoid the risk of future rate hikes.
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