Commercial Banks Take The Brokerage License To Guess: To Build An Aircraft Carrier Investment Bank.

Commercial banks have regaining their securities licence to the market.

In June 27th, a news of the securities and futures accounting issued to a commercial bank to issue a securities dealer licence opened the market. According to the news, the SFC will select at least two pilot companies from several major commercial banks.

In response to market rumors in June 28th, the SFC also said that the development of high quality investment banks is necessary to implement the State Council's decision and deployment for capital market development, and is also an important means to promote and expand direct financing. There are many ways to choose how to advance. However, the SFC also stresses that no matter what way it is adopted, it will not have a big impact on the existing industry structure.

5 years ago, regulators issued a licence for issuing securities dealers to the banks, but eventually they were shelved because of the stock market movement. For five years, the capital market and financial market have changed. Now, what is the reason why commercial banks get license from securities companies?

Commercial banks have regaining their securities licence to the market. -IC photo

Upper limit still exists.

Despite intense market discussions, commercial banks are still facing obstacles in terms of law in order to obtain licenses directly.

Commercial banks want to obtain the license of securities dealers. They must comply with the commercial bank law and the securities law. However, the upper two laws of the financial market clearly point out that commercial banks can not be mixed up for the time being.

The forty-third article of the commercial bank law, which was amended in 2015, stipulates that commercial banks shall not engage in trust investment and securities business in People's Republic of China, nor invest in non self employed real property or invest in non bank financial institutions and enterprises, except as otherwise stipulated by the state.

In fact, this requirement has been determined since the promulgation of the commercial bank law in 1995. Although the commercial banking act has been revised in 2003 and 2015 to meet the changing market and business environment, the principle of separating commercial banks from commercial banks has not changed.

There are also relevant provisions in the Sixth General provisions of the new securities law implemented this year, that is, the securities industry, banking industry, trust industry and insurance industry are divided and managed separately, and securities companies are established separately with banks, trusts and insurance business organizations. Unless otherwise stipulated by the state.

However, the two law related provisions are finally expressed in the form of "exceptions from the state", and the market knows what this supplementary clause means. As a matter of fact, this clause provides room for commercial banks to obtain securities licences. Therefore, the market also speculated that if the commercial banks obtain accurate information about the securities licence, the rate of approval will be approved by the State Council in the form of authorization or authorization.

But this also determines that in the short term, especially before the revision of the superordinate law, the commercial banks can obtain large scale securities licence and the possibility of mixed operation is very low. Commercial banks have a long way to enter the securities industry, especially at the present stage.

Many viewpoints of the market agree that although there are obstacles at the legal level, the mixed operation of financial institutions will be an irresistible trend in the development of domestic financial market. At present, commercial banks in China have obtained licenses such as trust, insurance and so on. Obtaining the license of securities dealers can be regarded as a closed loop of comprehensive business operation. The pilot experiment is likely to be a signal for further promotion of financial mixed industry.

However, the industry believes that the change from pre operation to mixed operation is not achieved overnight, but gradual change.

"From the perspective of the development trend of international financial industry, mixed operation is a major trend," said Hu Xiang, chief analyst of non banking finance in Soochow securities. However, we still have a long way to go: from the bank to the mixed industry, from banks to securities dealers, we need to further improve the institutional framework; the multi regulatory framework and the unified mechanism still need to be coordinated and improved to cope with the more complicated regulatory situation of financial mixed industries; the differences between the banking industry and the securities industry in terms of governance, incentives and risk culture need to be further coordinated and unified.

Joint efforts to build carrier class Securities Dealers

Why do we choose to conduct experiments at this time? In twenty-first Century, the economic report reporters learned from the exchange of the industry that from the industry level, it is undoubtedly an important attempt for the Securities Regulatory Commission to build an aircraft carrier head broker. Since the chairman of the SFC is ready to take office, the SFC has repeatedly promoted the establishment of an aircraft carrier head securities company.

From a deeper perspective, behind the licensing of commercial banks in the mixed operation, the regulatory authority hopes to further adjust the financing structure through such a way.

GF Securities analyst Ni Jun believes that different financial structures correspond to the allocation of financial resources by different types of financial institutions, which is mainly reflected by the differences in physical volume between banks and brokerages. The difference in the distribution of credit assets and financial assets leads to the difference in the volume of banks and brokerages. The difference between domestic and foreign investment bank business models has led to this gap. Under the predominance of banks, it is one of the ways to improve the financing structure to continue to promote mixed operation.

Specifically, what impact will the commercial banks take on the securities dealers' licenses? Will the entry of commercial banks subvert the existing business pattern of securities dealers?

As a matter of fact, after the news came out, the reaction in the securities business is far greater than that in the banking sector, which, to a certain extent, can also reflect the size gap between the two sides.

From the data level, it is also true. According to the Xingyi securities team, it is difficult to thicken the existing bank performance with simple financial indicators. Taking industry income in 2019 as an example, the banking sector achieved nearly 6 trillion yuan of revenue, while the securities industry only had 360 billion yuan. Even if the licence was released, the banking sector won 50% of the existing business share, which increased the banking revenue by about 2.5%-3.5%. At the same time, the securities industry is subject to a large fluctuation in the capital market cycle. In the market downturn, the ROE center is only 6%, and the stationary period is around 10%. The profitability of the banking sector can be effectively smoothed by the provision, and ROE can generally be maintained at over 10%.

Therefore, it is not the profit level of the securities companies that commercial banks take the securities license, but how to enlarge the license with their own resources. Ni Jun believes that bank controlled securities firms should be more focused on the incremental demand mining of current banking companies and high net worth customers, rather than a re cent of the current income of less than 400 billion yuan in the securities industry.

Kong Xiang, chief financial analyst at Xingye research group, believes that brokerages can become banks' converters and navigator in new assets. From the practice of Hongkong banking brokerage, the platform can not only carry out overseas underwriting business, but also link up with overseas branches, and also carry out equity investment business such as PE/VC through domestic subsidiaries, and become an important platform for the parent bank to "invest in loans".

Considering from the banking level, Kong Xiang believes that the current banking investment business mainly serves the main body of interbank market bond financing, and obtaining a securities licence will help to supplement the short board of equity and equity products. On the one hand, banks are matchmaking. At present, commercial banks in China are still at the core position in the integration of the financial industry chain. Through transaction, payment and settlement, banks cover the largest number of business customers and residents, such as banks can connect enterprises through investment banking services, connect with people through information management business, on the other hand, brokerage disintermediation, equity financing, mergers and acquisitions, market value management, equity incentives and so on. They can become the direction of investment bank customers' value-added.

Hu Xiang thinks that judging from the long-term trend, banks are coming, foreign capital is coming too. The boundaries of the industry are becoming more and more blurred. If we compete with each other, we will have to see "real kung fu". Operators in the industry need to think more about such a question: what is their core competitiveness and barriers?

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