The issuance, trading, registration, custody, and settlement of financial bonds in the inter-bank bond market and debt financing instruments of non-financial enterprises are managed by the People's Bank of China and its designated institutions in accordance with the current relevant regulations formulated by the People's Bank of China Law and others.

The regulatory basis for the 11 trillion yuan interbank market debt financing instrument has a clearer statement.

On March 11, the Central Bank and the China Securities Regulatory Commission jointly issued a "Reporter's Questions on Responsible Comrades on the Bond Market Supporting Real Economic Development", which responded to the relevant institutional arrangements of the inter-bank bond market after the new "Securities Law" was promulgated. The issuance, trading, registration, custody, and settlement of financial bonds and non-financial corporate debt financing instruments in the interbank bond market are governed by the People's Bank of China and its designated institutions in accordance with the current relevant regulations formulated by the People's Bank of China Law and others.

People close to the central bank told First Financial reporter that the reason for this arrangement is because the interbank bond market is over-the-counter and is geared to institutional investors. The public offerings described in the Securities Law are very large for public investors. different.

Some market participants questioned that the introduction of the new "Securities Law" still failed to resolve the issue of separate supervision.

People in the industry interviewed by the reporter of First Financial believe that the establishment of a unified management and coordinated development of the bond market is considered the general trend. However, China's bond market is complex, and many arbitrage and inefficiency problems are not entirely caused by the division of administrative supervision departments. They must also take into account the characteristics of different markets and take into account the economy and efficiency.

Clarify Central Bank's Responsibility for Interbank Credit Debt

The new "Securities Law" has been formally implemented since the beginning of the month. The relevant provisions on "corporate bonds" have aroused heated discussions in the market. The core focus is on how to define the debt financing instruments in the interbank market, which accounts for half of China's bond market.

On March 11, the People's Bank of China and the China Securities Regulatory Commission jointly issued a report on the bond market. It was stated in the reporter's question that the issuance, trading, registration, custody, and settlement of financial bonds and debt financing instruments of the non-financial enterprise in the interbank bond market were made The People's Bank of China and its designated institutions shall be administered in accordance with the existing relevant regulations formulated by the "People's Bank of China Law" and other regulations. Commercial banks and other underwriting agencies, credit rating agencies and other intermediary service agencies are still operating normally in the interbank bond market in accordance with the current relevant regulations.

In the next step, the People's Bank of China and other departments will continue to work together under the framework of the inter-ministerial coordination mechanism of corporate credit bonds to jointly promote the sustainable and healthy development of corporate credit bonds.

People close to the central bank told First Financial reporter that the reason for this arrangement is because the interbank bond market is over-the-counter and is geared to institutional investors. The public offerings described in the Securities Law are very large for public investors. different. The interbank market is currently operated and regulated in accordance with the People's Bank of China Law.

As of the end of last year, the total size of China's bond market has exceeded 96 trillion yuan. Among them, corporate credit bonds exceed 20 trillion yuan, which are mainly divided into three categories: interbank market debt financing instruments, corporate bonds, and corporate bonds account for 55%, 33%, and 12% respectively, and the corresponding scales are 11 trillion yuan, 6.9 Trillion yuan, 2.4 trillion yuan.

According to the new "Securities Law", corporate bonds under the supervision of the Development and Reform Commission and corporate bonds under the supervision of the Securities and Futures Commission are "corporate bonds"; financial bonds supervised by the central bank and non-financial corporate debt financing instruments under the supervision of dealers associations are not included .

Efficiency of market supervision

Earlier, many market participants questioned the "five dragons to control the water" pattern of the Chinese bond market, believing that market fragmentation has brought many problems such as regulatory arbitrage and inefficiency. The call for a unified bond market has a long history.

The so-called "five dragons govern the water" refers to the central bank, the Development and Reform Commission, the China Securities Regulatory Commission, the Banking and Insurance Regulatory Commission, and the Ministry of Finance all having substantive management actions on rating agencies. In most international bond markets, the bond market is usually regulated by the same body. For example, the US bond market is regulated by the Securities and Exchange Commission, and the Russian bond market is regulated by the central bank.

However, in China, the issuance of corporate bonds is subject to review by the Development and Reform Commission, corporate bonds are subject to the approval of the CSRC, and financial debt and non-financial debt financing instruments are subject to the central bank and registered with the Dealers Association. The bonds supervised by the central bank are issued and circulated only in the interbank bond market, and the bonds approved by the CSRC are circulated only on the exchange.

Professor Cheng Cheng, a professor at the School of Finance and Economics of Renmin University of China, told First Financial that China's bond market is relatively complex. It cannot be simply said that the division is not good, it must be completely unified, and it must also take into account the issue of economic efficiency.

For example, the interbank market is mainly a legal person market with institutional investors such as banks. The transaction volume is large and professional, and it can be regarded as a "wholesale market". The exchange market is mainly individual and some institutional investors. Small, more like a "retail market". The two are different in the way of price formation, and the requirements for information disclosure are also different.

In fact, there are also on-market and off-market markets in foreign countries, as in the United States, there are third and fourth markets. "They have not merged. From the perspective of economic rationality and efficiency, separate supervision is also reasonable." Mr. Chengcheng told reporters.

A person close to the regulator also told CBN reporters that the rules should be different for different markets and investors (on and off the market, institutions and individuals). The key is that the more intense the competition, the more conducive to corporate financing, the more conducive to investor protection, the more conducive to product innovation and institutional innovation, and preventing the formation of monopolies.

Unified management and coordinated development are trends

In fact, from the perspective of experts interviewed by China Business News, the introduction of the new "Securities Law" and the further clarification of the rules for the supervision of the inter-bank bond market by the central bank and the Securities and Futures Commission have shown that the Chinese bond market is gradually changing. Efforts towards unified management and coordination.

Mr Cheng said that this time the Securities Law included corporate bonds and corporate bonds into "corporate bonds". Among them, corporate bonds under the supervision of the Development and Reform Commission were actually traded across markets, which was a positive attempt.

As early as September 2018, the People's Bank of China and the China Securities Regulatory Commission jointly issued a document clarifying mutual recognition of the qualifications of bond market rating agencies, and proposed "gradual and unified development of an investor-oriented market-oriented evaluation of credit rating agencies". In addition, Credit rating agencies that operate simultaneously in the bond market and the exchange bond market shall unify the rating standards and maintain the consistency and comparability of the rating results. " This is regarded as a landmark document in the rating industry and has far-reaching significance for unifying the long-term segmented bond market.

Earlier, at the special meeting convened by the State Council's Financial Stability Development Committee, it was also specifically proposed to "establish a bond market with unified management and coordinated development."

From the perspective of Mr. Cheng, the so-called unified management of the bond market does not necessarily require the unification of the administrative supervision department. The key is to remove as many artificial obstacles as possible in the two markets, such as some regulatory requirements, rating standards, and information disclosure. The unification of aspects allows issuers and investors to freely choose the market. In the future, I hope that bonds can be traded across markets between the two markets.

Author: Xu Yanyan