The continued macroeconomic downturn, coupled with strong supervision, has stalled the trust industry that has been rushing for more than a decade. Many companies have exposed major problems and the trust industry is facing greater challenges.
Many investors and some trust companies hope that China Trust Insurance Fund Co., Ltd. (hereinafter referred to as "Credit Insurance Fund Company") can solve some of the problems.
According to the official website of the Credit Insurance Fund Company, as of the end of September 2019, the subscription, income distribution and liquidation of 22 trust industry protection funds have been completed, with the fund subscription balance of 145.676 billion yuan; the total assets of the trust industry protection fund are 153.542 billion yuan.
Another trustee said that the daily investment of the guarantee fund in financial products such as inter-bank deposits, money market funds, and national debt is a waste of resources.
At present, the trust industry is in a downturn. Why is the protection fund not used?
"If the trust company uses this money, it will show that the trust company has violations or failure to do its responsibilities, which will have a negative impact on its reputation in the industry, which will affect its business development; on the other hand, when the trust company disposes of risky projects, It is more inclined to use off-balance sheet methods, otherwise it will not be conducive to its industry rating." Usufruct Researcher Shuai Guorang told a reporter from China Business News.
However, a small and medium trust company person said that the original purpose of the establishment of the credit insurance fund company was to protect the development of the industry.
However, in its subsequent articles of association, it stipulated how to raise funds from trust companies. As for how to implement the rescue of trust companies with liquidity difficulties, it did not describe in detail.
The current market-oriented operation of credit insurance fund companies only conduct business from the perspective of income and risk and safety, and do not pay much attention to the rescue function of the industry.
As of press time, the Credit Insurance Fund Company has not responded to the CBN reporter.
Risks in the trust industry continue
Although with the stabilization of the epidemic, social production and business activities have gradually resumed, the business of trust companies has become normal.
However, the current scarcity of high-quality assets and the upward risk of default have aggravated investor risk aversion, and the trust industry is still facing greater pressure.
According to incomplete statistics from a reporter from China Business News, in the second and third quarters of this year, there were 190 breaches of trust products, involving 82.1 billion yuan.
Among them, the default risk of products invested in industrial and commercial enterprises remained high, with the largest number of default events and the largest amount of money involved.
In the first quarter when the epidemic was more serious, risk projects grew faster.
According to data from the Trust Industry Association, judging from the change in the number of risky projects and the scale of risky assets, by the end of the first quarter of 2020, the number of risky projects in the trust industry was 1,626, an increase of 79 from the previous month, an increase of 5.11%.
At the end of the first quarter of 2020, the scale of risk assets in the trust industry was 643.103 billion yuan, an increase of 66.056 billion yuan from the previous quarter, an increase of 11.45%.
From an institutional perspective, many trust companies have encountered considerable risks.
For example, Essence Trust has incurred significant losses for two consecutive years.
In addition, as of December 31, 2019, the overdue amount of Essence Trust’s inherent business liabilities has reached 2.4 billion yuan; as of June 30, 2020, Essence Trust has triggered 40 lawsuits (continuing) due to the provision of guarantees and other reasons. The amount is 17.805 billion yuan.
In June of this year, many TOT projects (a type of fund pool) of Sichuan Trust were overdue.
The total scale of the company's TOT products is about 25 billion yuan, involving 45 projects, which will expire in the second half of this year to the next few years.
In addition, in July this year, because New Era Trust and Xinhua Trust triggered the takeover conditions specified in Article 38 of the Banking Regulatory Law of the People’s Republic of China and Article 55 of the Administrative Measures for Trust Companies, the China Banking Regulatory Commission Institutions take over.
The period of takeover is from July 17, 2020 to July 16, 2021, and can be appropriately extended according to law.
"At present, the transformation of the trust industry is not smooth. The collective trust market is cold in the third quarter of 2020, and the decline in the scale of financing businesses is a more direct reason. Trust companies currently focus on the important layout of transformation in standard trusts and traditional businesses. In terms of upgrading and transformation, due to various restrictions, there has not been much improvement. In addition, the trust industry experienced high risk in the third quarter, and non-standard fund pool products have revived. Trust companies are expected to be cautious in their business development." A trust analysis The person said.
153.542 billion yuan guarantee fund "stands still"
At present, more and more market eyes are focused on trust fund companies.
According to the official website of the Credit Insurance Fund Company, it was established by the Trust Industry Association and 13 trust companies with stable operations and strong strength. It was issued a business license on January 16, 2015 with a registered capital of 11.5 billion yuan.
As the manager of the guarantee fund, the Credit Insurance Fund Company is responsible for the raising, management and use of the guarantee fund. Its main task and goal are to prevent, resolve and dispose of risks in the trust industry in accordance with the principles of marketization, and promote the sustainable and healthy development of the trust industry.
The official website of the Credit Insurance Fund Company also shows that as of the end of September 2019, the subscription, income distribution and liquidation of the 22 trust industry protection funds have been completed, with a fund subscription balance of 145.676 billion yuan; the protection fund has realized a cumulative investment income of 16.883 billion yuan to 68 companies. The trust company distributed 6.135 billion yuan in income and 7.583 billion yuan in retained earnings. All retained earnings were rolled into the fund; the total assets of the protection fund were 153.542 billion yuan.
What is the relationship between trust companies and credit insurance fund companies?
It is mainly in two aspects: trust companies subscribe for trust guarantee funds and apply for guarantee fund loans under certain conditions; credit insurance fund companies can use their own funds to provide liquidity support for trust companies.
Regarding the source of the protection fund, the "Administrative Measures for the Trust Industry Protection Fund" stipulates that the current subscription of the protection fund shall implement the following unified standards. After the conditions are mature, the differential subscription standard will be implemented according to the risk status of the trust company: the trust company shall subscribe at 1% of the net asset balance , The net asset balance before the end of April each year is the base dynamic adjustment; the fund trust is subscribed at 1% of the newly issued amount, of which: the investment fund trust for the purchase of standardized products shall be subscribed by the trust company; it is a financing fund If it is a trust, it shall be subscribed by the financier.
At the end of the issuance of each fund trust product, it shall be paid into the special fund account of the trust company, and the trust company shall transfer the payment to the protection fund company quarterly; the newly established property trust shall be calculated at 5% of the remuneration collected by the trust company and subscribed by the trust company .
Currently, it is more common for credit insurance fund companies to provide liquidity support for trust companies with their own funds.
For example, in May 2019, Oceanwide Holdings disclosed that its controlling subsidiary Minsheng Trust applied for 700 million yuan of liquidity support funds from the Credit Insurance Fund Company, and its controlling subsidiary Wuhan Central Business District Co., Ltd. will provide guarantees for the above financing; In July 2019, the Bank of Xi’an issued an announcement stating that it had received a notice from its shareholder Changan Trust that it was informed that Changan Trust had pledged 76.73 million restricted shares to the Credit Insurance Fund Company.
The question is, under what conditions can a trust company apply for the protection fund?
The "Administrative Measures for the Trust Industry Guarantee Fund" stipulates that the guarantee fund is mainly used to provide short-term liquidity support to trust companies and to dispose of high-risk trust companies, specifically: trust companies still need to implement recovery and disposal plans due to insolvency. Reorganized; Trust company enters bankruptcy proceedings according to law and undergoes reorganization; Trust company is ordered to close or cancel due to illegal operations; Trust company needs to provide short-term liquidity support due to temporary capital turnover difficulties; Need to use guarantee funds Other situations.
A person from a small trust company said that some trust companies currently have liquidity risks and need support.
For example, the fund pool business used to be issued under a default license. Now, with strong supervision and economic downturn, the brakes are slammed. Some trust companies have encountered considerable financial difficulties.
The protection fund is set up in response to the interests of investors. In resolving risks, the trust company should get the help of the protection fund in the first step, rather than the trust company using its own funds or letting investors take risks completely.
"It may also be that the more than 10 shareholder units of the credit insurance fund company are currently operating relatively steadily. What the credit insurance fund company pursues is market-oriented behavior, so it believes that there is no obligation to help other risky trust companies."
The above-mentioned person said.
Another person in the industry said that if the regulatory agency or the court finds that the trust company has violated regulations or failed to perform its duties and should compensate for the losses, the trust company can use the protection fund.
However, in the current market, this situation has not yet appeared.
In addition, a reporter from China Business News found that at the end of August this year, Essence Trust announced that Essence Trust had applied for liquidity support from the Credit Insurance Fund Company due to business development needs.
The liquidity support principal provided by the Credit Insurance Fund Company is 5.65 billion yuan, which is already overdue.
The registered capital of the Credit Insurance Fund Company is 11.5 billion yuan, but the amount of liquidity support provided to Anxin Trust is so large, this is a bold move.
At present, how does the overdue business affect the credit insurance fund company?
In addition, at a time when many trust companies have frequent risks, what is the reason why the protection fund has not been used? Is there another layout?
Credit Insurance Fund Company did not respond.
Author: Chen Hongjie