On January 17, a reporter from China Securities Journal and China Securities Taurus exclusively learned from a number of securities companies that the Securities Association of China's Margin and Securities Lending Business Committee recently held a symposium on the risk management of securities companies' two-financing business, focusing on two-financing risk management and credit reduction. A full discussion was carried out on the provision of value reserves, and the "Advice on Risk Management and Credit Impairment Measurement of Margin Trading and Securities Lending" was issued to the industry a few days ago, conveying the good experience and practices of relevant securities companies and issues that need attention, for the industry to learn from.
In terms of business risk management, on the one hand, securities companies need to strengthen the dynamic management and control of transactions, and refine the monitoring of position concentration and volatility; amount of loss occurred.
In terms of credit impairment measurement, securities companies should pay special attention to the pro-cyclicality of risk accumulation in margin financing and securities lending business and the differences in customer transaction behavior, and fully accrue credit business assets based on the principle of accounting prudence in light of market trends and credit account risk characteristics. Provision for impairment.
Taking into account market risk and credit risk
The China Securities Association said that with the continued active trading in the capital market, the balance of the two financing exceeded 1.8 trillion, and pro-cyclical risks have accumulated.
At present, various securities companies have generally established a risk management framework for the two financing business covering multiple dimensions, and it is necessary to further refine and improve the risk control measures.
At the same time, the credit impairment of the two financing business should also be dynamically adjusted and differentiated based on the purpose of risk management, and the counter-cyclical risk control idea should be rationally used to fully reflect the expected credit risk and promote the long-term stable and healthy development of the industry.
According to the "Advice on Risk Management and Credit Impairment Measurement of Margin and Securities Lending" issued by the China Securities Association to the industry, due to the inherent dual attributes of transaction and leverage in the two financing business, the management idea needs to take into account market risk and credit risk. On the one hand, it is necessary to strengthen the transaction On the other hand, it is necessary to continuously improve customer credit reporting, maintain a reasonable collateral structure, and effectively prevent default risks, especially large losses.
Specifically, risk management measures should include the following three aspects:
Prudent credit granting, and good financing access.
According to the customer's asset status, credit investigation results and risk tolerance, it dynamically manages the customer's credit rating, credit line, margin ratio, etc.
Some brokers have supplemented and strengthened the due diligence and management of high-net-worth clients, and reduced potential default risks through risk control measures such as raising the liquidation line and reducing the concentration of positions; Strengthen the control of customer credit behavior.
Keep an eye on risks and do a good job in dynamic management and control.
The structure of the credit account, the quality of the collateral and the trading risk appetite, etc., jointly determine the probability of occurrence of credit risk and potential default losses under market fluctuations.
Some securities firms have built a multi-factor risk scoring system to quantify the risks of individual stocks, achieve classified management of guaranteed securities, and make regular or irregular adjustments based on market performance.
Some securities companies adopt a combination of front-end control of transactions and risk prevention in the event, and dynamically control the new position limit by integrating the maintenance guarantee ratio of the credit account, the distribution of position risk, and the concentration of the sector, so as to realize the incremental management of the risk in the event; Focus on monitoring high debt/high concentration, suspected related-party transaction accounts, etc.
Trend thinking, make good use of counter-cyclical measures.
Most securities firms have established a comprehensive risk monitoring system, and introduced macro-adjustment factors when determining risk limits. When the market continues to trade actively and the balance of margin financing and securities lending continues to rise rapidly, they adjust risk control indicators appropriately to prevent rapid accumulation of risks; When the valuation is at a low level, the credit account holdings are scattered and the willingness to leverage trading is low, moderate risk control measures will be resumed to maintain the sustainable and stable development of the business.
Wind data shows that since mid-July 2021, the balance of A-share financing and financing has remained above 1.8 trillion yuan.
Since 2022, the daily trading volume of A-share financing and financing has remained above 70 billion yuan, accounting for about 7% of the A-share trading volume.
Periodically assess and dynamically adjust the credit impairment stage and ratio in a timely manner
In terms of credit impairment measurement, the China Securities Association stated that the credit impairment treatment of the two financing business should effectively follow the requirements of relevant accounting standards and impairment guidelines, and make provision for impairment on the basis of expected credit losses, while fully considering the economic substance of the transaction. .
In practice, special attention should be paid to the pro-cyclicality of risk accumulation in the two financing business and the differences in customer transaction behavior, and combined with market trends and credit account risk characteristics, based on the principle of accounting prudence, sufficient provision for impairment of credit business assets should be made.
Specifically, the measurement of credit impairment should follow the following four principles:
Strictly abide by accounting standards and improve the impairment framework.
According to the relevant accounting standards, the expected credit loss is the weighted average of the credit losses of financial instruments with the risk of default as the weight.
The two financing business shall comprehensively evaluate the reliability of the performance of the financing/securities lending entity, the security of the secured assets, and the periodicity of business development, establish and improve the impairment model or impairment framework, and reasonably evaluate the degree of business credit risk.
Refine the judgment criteria and prudently assess the risk of loss.
For contracts without credit impairment, considering that there are certain differences in the business scale, contract status, and customer composition of various securities firms, market factors should be comprehensively considered on the basis of maintaining a relatively consistent business risk management logic (business scale is high or When liquidity is tight, we should be alert to the impact of market adjustments), our own factors (market share, balance concentration, and historical default rate are high, risk buffers should be appropriately increased), customer factors (considering sources of funds, solvency, historical defaults) situation and credit matching degree), contract factors (high concentration, high risk positions, low maintenance guarantee ratio, etc., risk weight should be increased), regularly evaluate and dynamically adjust the credit impairment stage and ratio in a timely manner.
Some securities companies also proposed that considering that securities lending transactions usually involve complex strategies, and the scale has increased rapidly in recent years and the potential risks are relatively high, it is advisable to set up an expected credit impairment assessment system for the securities lending business separately to fully reflect its risk characteristics.
Follow business logic and optimize model parameters.
The two financing business is a secured transaction business. Under normal operation, the overall default rate is relatively low, but it is pro-cyclical and sensitive to market fluctuations, individual stock changes and liquidity. When selecting the expected credit loss model parameters, Fully consider market conditions and make forward-looking adjustments.
For example, some securities companies establish a migration matrix based on historical business risk data, and combine macro and micro influencing factors to obtain the adjusted migration matrix and the default probability within the corresponding remaining period; some securities companies apply customer risk profiles and internal ratings to increase funds High-risk weights are given to high-risk stocks, high-concentration positions, aggressive trading behaviors, etc., and the ratio of accrual is increased; some securities companies have added stress test adjustment factors in combination with historical abnormal fluctuations to fully reflect forward-looking risk management ideas.
Summarize practical experience and form reference standards.
Experts at the meeting believed that it is reasonable to accrue credit business impairment losses in the range of 0.05%-1.5% for the devaluation ratio of no credit-impaired contracts based on the historical operation of the two financing business and industry practice. If the calculation result of the internal impairment model exceeds the range standard, the calculation result of the model shall prevail in accordance with the principle of prudence.
At the same time, considering that the impairment provision has fully reflected the current credit loss and expected credit risk, and the risk control indicator has calculated the credit risk capital reserve at 10% for the two financing business, in order to avoid the increase in capital consumption due to double calculation, the loan can be transferred out. The part of the capital credit impairment reserve exceeding the calculation of the company's credit impairment model (approved by the auditor, in principle not less than 0.05%) is added back to the core net capital in the "Other Adjustment Items" in line 16 of the "Net Capital Calculation Sheet".
(Zhao Zhonghao)