The China Securities Regulatory Commission has comprehensively optimized the risk control index system of securities firms, and the four core indicators have maintained the standard of 1.5 to 2.5 times for a long time

Yangtze River Business Daily News ● Yangtze River Business Daily reporter Li Jing

After a lapse of four years, the calculation standards of risk control indicators of securities companies have been revised again.

The China Securities Regulatory Commission announced on September 20 that in order to fully reflect and effectively prevent the risks of securities companies, according to the development of the market, it recently revised and issued the "Provisions on the Calculation Standards for Risk Control Indicators of Securities Companies" (hereinafter referred to as the "Regulations"), which will be officially implemented on January 1, 2025.

The China Securities Regulatory Commission pointed out that since the revision of the calculation standards for risk control indicators of securities companies in 2020, after more than four years of practice, the securities industry's anti-risk ability has been steadily improved, and the four core risk control indicators of risk coverage ratio, capital leverage ratio, liquidity coverage ratio and net stable funding ratio have been maintained at the level of 1.5-2.5 times of the regulatory standard for a long time, and the industry has continued to develop steadily.

With the release of the new standard, it will further play the role of risk control indicators as the "baton" of resource allocation of securities companies, enhance the initiative and effectiveness of comprehensive risk management, and provide strong support for economic and social development with its own high-quality development.

Adjust and optimize risk control indicators in four aspects

In recent years, the regulatory authorities have continuously improved the risk control index system with net capital and liquidity as the core, urged securities companies to implement comprehensive risk management requirements, and consolidated the foundation of internal control and compliance.

In 2016, the China Securities Regulatory Commission (CSRC) promulgated the Measures for the Management of Risk Control Indicators of Securities Companies and the supporting risk control index calculation standards, improving the risk control index system of securities companies with net capital and liquidity as the core. Years of practice have shown that the risk control index system has effectively improved the risk management level of securities companies and effectively enhanced the industry's ability to resist systemic risks.

In order to promote the sustainable and steady development of the securities industry and further enhance the effectiveness and adaptability of the risk control index system of securities companies, the China Securities Regulatory Commission revised and issued the first version of the Provisions in 2020. Over the past four years, the securities industry's ability to resist risks has been steadily improved, and the four core risk control indicators have been maintained at the level of 1.5-2.5 times of the regulatory standard for a long time, and the industry has continued to develop steadily without major risk events. The risk control index system has played an important role in improving the risk management level of securities companies and enhancing the industry's ability to resist risks.

With the development and changes of the capital market and the securities industry, it is necessary to further improve the risk control index system again to meet the needs of risk management and industry development under the new situation.

The Yangtze River Business Daily reporter learned that compared with the current first edition, the newly revised "Provisions" mainly involve optimization and adjustment in four aspects, including improving business measurement standards and guiding the functional role; Optimize classification and measurement, and guide the active strengthening of risk management; Combined with market practice, improve the completeness of the indicator system; Strengthen capital constraints and strengthen risk prevention for key businesses.

The "Provisions" give full play to the guiding role of risk control indicators, optimize the calculation standards of risk control indicators for securities companies investing in stocks, carrying out market-making and other businesses, and further guide securities companies to give full play to the roles of long-term value investment, financing of the real economy, and wealth management of residents. According to the risk management level of securities companies, optimize the adjustment coefficient of risk control indicators, support compliant and stable high-quality securities companies to appropriately improve the efficiency of capital use, and better provide comprehensive financial services for the real economy.

At the same time, the "Provisions" include all business activities of securities companies in the scope of risk control indicators, clarify the calculation standards of risk control indicators for securities companies participating in public REITs and other new businesses, improve the completeness and scientificity of the risk control index system, and consolidate the foundation of risk control.

In addition, the calculation standards for risk control indicators will be strictly set for innovative businesses and businesses with higher risks, the measurement standards for over-the-counter derivatives will be appropriately increased, and the supervision of private placement, non-standard asset management, custody and other businesses will be strengthened, so as to improve the effectiveness of supervision and maintain the stable operation of the market.

In the revision note, the China Securities Regulatory Commission pointed out that the revision mainly reflects the regulatory orientation of four aspects: highlighting comprehensive coverage, highlighting prudence and strictness, strengthening risk management, and promoting the play of functions.

Help high-quality securities companies to become better and stronger

It is worth noting that the revision will expand the capital space of high-quality securities companies by relaxing the adjustment factor for risk capital reserves of high-rated high-quality securities companies and the conversion factor of total assets on and off the balance sheet.

Specifically, the "Provisions" mainly improve the calculation standards for risk control indicators of securities companies investing in stocks, carrying out market-making and other businesses, and appropriately optimize the risk control indicators of high-quality securities companies, that is, appropriately adjust the risk capital reserve adjustment coefficient and the conversion coefficient of total assets on and off the balance sheet of securities companies that have been classified and evaluated for three consecutive years, differentiate and enrich the available and stable funds, set a transition period for securities companies to adapt to the new classification evaluation results, and guide securities companies to actively strengthen risk management.

In recent years, the number of securities companies of various categories has remained stable overall, with the number of Class A, Class B and Class C companies accounting for 50%, 40% and 10% respectively, and the number of AA companies remaining at about 14. Compared with the initial version, the revised "Provisions" have many "preferential treatments" for securities firms with the highest classification evaluation results.

For example, in terms of the adjustment coefficient of risk capital provisions, the adjustment coefficient of Class A AA or above (inclusive) has been lowered from 0.5 to 0.4 for three consecutive years, from 0.7 to 0.6 for Class A for three consecutive years, 0.8 for Class A, 0.9 for Class B, 1 for Class C and 2 for Class D, which have remained unchanged from before.

In terms of the conversion coefficient of total assets on and off the balance sheet, the conversion coefficient of Class A AA or above for three consecutive years is 0.7, Class A for three consecutive years is 0.9, and the rest is 1; All of the above are newly added provisions in this amendment.

From the perspective of the "Regulations", the optimization of relevant indicators will help high-quality securities firms with top classification and rating results to break the bottleneck of the current risk control indicators such as net stable funding ratio and capital leverage ratio, further improve the return on net assets, expand business and provide more diversified financial services, accelerate the development of institutional and asset management business, and become better and stronger.

Industry insiders pointed out that this move is expected to release nearly 100 billion yuan of funds, promote the effective improvement of capital use efficiency, and increase the service of the real economy and residents' wealth management.

In fact, from a policy point of view, promoting securities companies to be better and stronger has been mentioned many times this year.

The Yangtze River Business Daily reporter noted that the "Opinions on Strengthening the Supervision of Securities Companies and Public Funds and Accelerating the Construction of First-class Investment Banks and Investment Institutions (Trial)" issued by the China Securities Regulatory Commission in March proposed that it would strive to promote the formation of about 10 high-quality head institutions to lead the high-quality development of the industry in about 5 years, and by 2035, 2 to 3 investment banks with international competitiveness and market leadership. The new "National Nine Articles" released in April also proposed to support leading institutions to enhance their core competitiveness through mergers and acquisitions, organizational innovation, etc., encourage differentiated development and characteristic operation of small and medium-sized institutions, and clearly encourage head securities companies to become bigger and stronger through mergers and acquisitions.