Underground Financing For Brokerages: Disaster Continues

Ajian securities accounts for about 2000000000 yuan outside the loan, speculation stocks, and suspected of misappropriating social security funds.

News came out, AI Jian stocks fell sharply, followed by AI Jian Securities chief figure Liu Shunxin was under criminal detention......

The underground financing has revealed that the number of private equity funds in and out of the market is around 400 billion yuan. The scale of the underground financing market is astonishing.

At the same time, the securities companies undertook underground financing, and the stock speculation events were repeatedly exposed, resulting in frequent closure of securities companies.

In January 2nd, Nanfang Securities caused huge losses due to illegal financial services and historical problems, which was taken over by the government.

In December 5, 2003, Xinhua securities broke the Treasury bond repurchase financing because of its violation, and the encyclopedia drug industry was cracked up, and was cancelled by the securities and Futures Commission.

So far, many securities companies such as China Economic Development Trust and investment company, Anshan securities, Dalian securities, rich securities, Jiamusi securities, Xinhua securities and Nanfang Securities have been closed down, revoked or taken over.

From a closed or revoked securities company, it is mainly concerned with four irregularities financing: illegal financial management, private client misappropriation, illegal bond repurchase, and illegal financing in the name of issuing bonds.

"Everyone knows the consequences of illegal financing, but the annual headquarters issued a heavy financing task, you must try to complete; moreover, two years, the sales department is very difficult to operate, headquarters will not give money to support us, the sales department financing to self run is also to survive."

The head of the business department of GF issued a painfully saying that for a long time, the general manager of the sales department has been living under the pressure of profit targets.

"The risk of illegal financing is really compelling, because the market continues to slump, the funds are always stretched and the pressure of survival is enormous."

A vice president of Dapeng securities financing said frankly, because securities companies have almost no financing channels, their own funds are very limited. To expand their business and lack enough capital to run, things have naturally developed.

An industry insider said that under normal circumstances, the securities companies borrowed funds from banks, because the supervision of bank credit funds was stricter, and the amount they could get was very limited, so there was no way to carry out illegal financing activities through the securities business department, because the sales department had many financing channels, such as joint private equity funds, misappropriation of customer deposits, illegal treasury bonds repurchase, and so on, so the business department became the main window of underground financing.

A brokerage analysis report shows that the total number of securities companies is 131, and the basic trading volume to maintain their survival should be 60 billion yuan to 70 billion yuan per day.

In fact, at present, the Shanghai and Shenzhen two cities have less than 20 billion yuan daily turnover, which means 2/3 of the securities companies are in a state of loss.

Gong Maoquan, senior financial adviser of Voight financial group, pointed out that although the whole industry losses of Chinese brokerages are related to the big climate, institutional defects, internal regulatory confusion and top management corruption are the reasons that can not be ignored.

"A $about 2000000000 private equity fund keeps us in touch with us all the year round. When it comes to a good market, we share the stock together because it's an old relationship, and the financing conditions are easier to talk about."

A head of the sales department said that underground private capital has become a tacit financing activity for the securities companies.

In the entrustment financing business, some illegal "off balance sheet financing" businesses are constantly causing fraud and fraud. Investors often suffer losses without knowing it.

Earlier, in the investigation of closing Anshan securities, it was found that 34 million yuan of Fujian cement entrusted financial management funds was privately appropriated by Anshan securities company.

With the closure of Anshan securities by the SFC, the huge sum of Fujian cement is likely to be gone forever.

The repurchase of illegal bonds is another black hole for securities companies.

Fu you securities repurchased the Treasury bonds illegally, and the amount of financing was as high as 3 billion 900 million yuan, and about 2 billion yuan was used for the speculation of Xugong technology. Xugong technology resulted in 7 successive down limits, and the share price dropped from 18.36 yuan to 8.39 yuan, or 54%.

According to the survey, dozens of agencies involving commercial banks, state owned enterprises and listed companies have been investigated in Fu Fu securities's illegal Treasury repurchase activities. Among them, Shanghai rural credit cooperatives is the largest customer, involving about 1 billion 700 million yuan, accounting for nearly half of the total amount of treasury bonds appropriated by Fu you securities.

Zhao Xijun pointed out that the amount of illegal financing is huge, and the tactics are secretive. After the incident, the situation is often difficult to clean up.

In order to ensure the normal operation of the securities market and protect the interests of investors, management should dredge normal financing channels as soon as possible and strictly supervise the system.

It is hard for us to imagine that the securities of the South would be such a big thing.

A deputy general of the head office of the head office said that comprehensive securities firms are still hard to be independent, and those smaller ones may be more serious.

We have to reexamine the impact of the operation of securities firms on bank security.

The CBRC solemnly warned the whole industry to try to reduce the financing cooperation between banks and brokerages before checking the losses or potential losses caused by the securities loan to banks.

Obviously, it is a response to the problem of Southern Securities.

"Now, it is very tight to control the loan business of the securities companies, basically not allowed to do."

A staff member of the head office of the Bank of Communications said, "the meaning of management is to have a pause."

"Recently, because of the constant occurrence of securities companies, the CBRC began to worry about how deep the risks of banks are in the securities market and how much they are implicated."

The head of the Banking Regulatory Commission of the CBRC said.

In January 8th of 2004, the China Banking Regulatory Commission (CBRC) convened the internal meetings of major banks urgently, ordered banks to shrink the financing loan business of brokerages, and thoroughly checked the real situation of financing services provided by brokerages to banks.

The meeting stressed that the "off-site one day cash in hand lending" with the nature of illegal financing is the focus of inventory.

Data show that on the day of the conference, the credit interbank loan in the interbank market was 9 billion 976 million yuan, a decrease of 8 billion 393 million yuan compared with the previous trading day. In January 9th, the lending rate was 7 billion 930 million yuan, which was reduced by 2 billion 46 million yuan, while the average interest rate increased from 2.1203% to 2.1837%, an increase of 6.34 basis points.

In the Treasury bond repo market, the most active R007 varieties on 8 and 9 days, with a sharp decrease of 70% in volume and a 50% rise in interest rates.

It can be seen that the attitude and speed of banks in self protection.

If the current situation is allowed to develop, the Domino of underground securities financing is bound to go back to the bank.

The government of the securities company closed down on 1 2.

"The customers who have been misappropriated are finally able to feel relieved, and the huge debts of creditors of each institution will also be put on the table by the government's intervention."

A person who has left Southern Securities explained that the government involved had to face the problem.

According to "finance and economics" disclosed, the Southern Securities self operated loss about 3000000000 Yuan, appropriated the customer margin 1 billion 900 million yuan.

The government's offer means that these arrears will be properly arranged by the government.

In December 5th 2003, Xinhua securities was revoked, with a deficit of up to 1 billion 800 million yuan.

The central bank made a one-time payment of 1 billion 450 million yuan to fill the company's customer security hole. The Jilin provincial government paid 400 million yuan of cash for the company to finance the deficit.

"This actually constitutes a great pressure on the basic monetary issue of the people's Bank of China".

Fan Jianjun, a researcher at the Financial Research Institute of the development research center of the State Council, said.

After the collapse of the securities company, the government took over and avoided the turmoil. However, the government's paying behavior is the question of whether the taxpayers are fair or not.

Observation of the incident: to widen the financing channels, "the financing of the securities companies is one of the causes of underground financing."

Li Xunlei, director of Guotai Junan Research Institute, believes that securities companies are a bridge and link for the operation of the securities market, and smooth financing channels guarantee their smooth operation.

If there is no such channel or channel is not smooth, it may force its business to make a substantial adjustment, or engage in misappropriation of deposits and other irregularities.

For a long time, the lack of financing channels is one of the important institutional reasons that restrict the normal functioning of securities companies.

Mr Li pointed out that compared with the increasing demand for financing of securities companies, the existing short-term financing channels are only a drop in the bucket, so many securities companies do not use this frequency very much.

In addition, because the threshold conditions are relatively high, the number of securities dealers who have benefited from the issuance of bonds and the number of brokerages who can engage in collective asset management business is also very limited.

Zhao Xijun, a finance and Securities Research Institute of Renmin University of China, pointed out that the development of securities companies has undergone significant changes. Therefore, regulators need to re recognize the financing capacity, financing scale and financing structure of securities companies, and make reasonable institutional arrangements at the right time.

First, the demand for securities companies' financing will tend to be longer in the short run. Two, the scale demand of securities companies should match the expansion speed of the securities market; three, the structural needs of securities companies should be coordinated with the diversification trend of securities companies.