The Global Financial Industry Must Be Prepared For Challenges.

Since the US financial crisis in 2008, central banks around the world are adopting quantitative easing monetary policy, especially in developed countries in Europe and the United States. Monetary policy has loosened loosely and interest rates have not been the lowest, but only lower.

And this quantitative easing monetary policy has lowered interest rates to zero level, and the level of interest spread of traditional banks has dropped sharply, making traditional banking business unprofitable and difficult to survive.

These traditional banks have huge assets but are unable to get profits and are forced to turn to a large number of derivative financial instruments as an important source of bank income.

Excessive financial operations or relying on financial derivatives can not only lead to sharp fluctuations in bank profits, but also lead to illegal manipulation of the market, resulting in huge criminal penalties and civil compensation.

This is the survival environment that the traditional banking industry is facing at present. It also makes the global financial industry face unprecedented challenges.

For example, Deutsche Bank announced in October 8th that the pre tax losses in the third quarter would be 6 billion 200 million euros or 7 billion dollars.

The main reason is the decline in investment banking business.

Because of the global stock market crash of August this year, the global financial market has been overly volatile, and the stock market, foreign exchange market and commodity prices have plunged sharply. The investment banking business of Deutsche Bank is also facing huge losses in the global market.

For traditional banks, once interest rates fall to a very low level, if they rely solely on investment banking to increase profits, of course, they will face enormous risks of global market volatility.

The recent domestic corporate debt craziness can be related to the current financial market.

According to the data, in October 13th, a total of 414 corporate bonds were issued in 2015, with a scale of 428 billion 700 million yuan.

The scale of issuance in 2014 was only 367, with a total scale of 105 billion 800 million yuan, with a difference of 4 times.

It is reported that in October this year, nearly 10 large enterprises issued corporate bonds, financing and financing amounted to 30 billion yuan, and the issuance amount in one month exceeded the total in 2014.

The frenzy of corporate bonds has reached this level, which is the same as the stock market frenzy in the first half of the year.

In the current corporate debt blowout, real estate companies are the main force, followed by platform companies.

The financing of corporate bonds basically flows into the financing platform of real estate enterprises and local governments.

And the frenzy of corporate bonds is related to its falling interest rates again and again.

At the end of September, Vanke issued 5 yuan corporate bonds with a scale of 5 billion yuan, and the interest rate competition was low to 3.5%, just 37 points higher than that of the same day treasury bonds 3.13%.

And the 10 year treasury bond issued in October 14th has a winning interest rate of 2.99%.

This is the first time it has fallen below 3% since December 2008.

This also means that the 10 year treasury bonds will return to the "2" era after 7 years.

The interest rate in the domestic financial market has been pushed to its lowest level ever since.

The interest rate in the financial market has been reduced in an all-round way, and the domestic banking industry has also been running the era of no spreads.

That is to say, because the real economy has encountered an unprecedented downward trend, the Central Bank of China has to make monetary policy loose and loose, and the liquidity of traditional banking system is inevitable.

This is true for traditional banks operating at a level of 3%.

The sudden change made domestic banks fall into the panic of asset allocation. The strange phenomenon of Jingdong's "white ABS" (close to unsecured real estate bonds) was sold out, and Vanke bonds and national debt credit were shoulder to shoulder.

This is, of course, an unprecedented challenge for the domestic banking sector.

It can be said that in the face of the operating environment without spreads, has the domestic traditional banks been prepared?

If the domestic banking industry's business mode and business are fully pformed, are the corresponding regulatory departments ready?

At the same time, no margin business may make the profits of the traditional banking industry fall in full.

These are all questions to be considered.

The domestic financial market is also facing unprecedented challenges.

Moreover, because traditional banks are too dependent on investment banking to survive, if the market is stable, the investment banking business run by these traditional banks with capital advantage may be able to operate or show their advantages, but once the market is shaking, in order to maintain profits or avoid losses, these investment banks may trigger illegal manipulation of the market at any time, which will easily lead to huge criminal fines and civil compensation.

For example, in May this year, including Germany.

Many European and American banks, including the United Kingdom, the European Union regulatory mechanism and the financial regulators of the United States, have reached a concession and reconciliation to compensate for the improper manipulation of the interbank offered rate in the London money market. The amount of confession and reconciliation has reached 6 billion dollars.

Moreover, HSBC, the world's largest international bank, has not been able to revitalize its performance in recent years. The biggest reason is that all kinds of illegal operations are fined for compensation.

Under such circumstances, these traditional banks have to completely shrink the investment banking business.

For example, Deutsche Bank, after paying huge amounts of compensation, has also cut down the financial sector and sold a large number of derivatives portfolios.

At the same time, a large number of employees were laid off, the proportion of which was only 25% higher than that of the total staff.

The same is true of HSBC.

It can be seen that the low interest rate era and the no spread operation have brought unprecedented challenges to traditional banks.

This will affect the pattern and behavior of the global financial market and cause unprecedented changes.

Similarly, in the past

With the deepening of interest rate marketization and the launch of quantitative easing monetary policy by the Central Bank of China once again, the interest rate of traditional banks has also dropped sharply. The current domestic banking industry is also facing unprecedented challenges of pformation. With the deepening of interest rate marketization, three banks have been making huge profits.

For example, since November 2014, the Central Bank of China has made 5 interest rates and 4 reductions. After the August stock market crash, the central bank's loose monetary policy is not the most relaxed and only looser.

However, due to the problem of overcapacity, the tightening of manufacturing industry and the shrinking of real estate investment, the liquidity of the banking system is very rampant.

But these liquidity can not enter the stock market, and a large number of traditional banks with large liquidity will have to encourage enterprises to issue corporate bonds in large quantities.