Bank securities mixed operation of three major forecast trend

2020-07-10

After Citic Securities and Citic Construction investment Securities responded to regulatory inquiries, the two big brokerage merger rumors have come to an end. Securities Times reporter noticed that, as the stock sector surged last week, mixed industry rumors have become a hot topic in the industry, related speculation has also derived a variety of models.


After Citic Securities and Citic Construction investment Securities responded to regulatory inquiries, the two big brokerage merger rumors have come to an end. But another rumor remains unanswered, namely, will the big state-owned Banks get regulatory permission to obtain brokerage licenses?


Securities Times reporter noticed that, as the stock sector surged last week, mixed industry rumors have become a hot topic in the industry, related speculation has also derived a variety of models.


Zhao Ran, chief researcher of Citic China Construction Investment Securities, believes that there are three alternative modes for mixed business. First, the all-purpose banking mode, in which commercial Banks directly carry out brokerage business, is similar to the structure of Deutsche Bank. Second, the bank holding brokerage mode, that is, either to create a new brokerage, or equity participation or holding brokerage, to achieve business collaboration; The third is the financial holding company model, under which the main body of the holding group is not a bank, but a comprehensive financial service platform with multiple licenses covering Banks, securities brokers, insurance, direct investment and so on.


Three models are hotly debated


The reporter understands, these 3 kinds of development mode, basically covered at present stockbroker research report and the suggestion that interviewed stockbroker personage.


First, the so-called universal banking model, in which a brokerage becomes a department or division of a bank. Zhao Ran thinks, want to realize mixed industry in this level, still have legal obstacle at present. From the perspective of risk control, the all-purpose banking model is prone to risk contagion among different attribute departments within the group. This plan also involves the adjustment of policy regulatory framework, corporate organizational structure, corporate risk control system and other aspects. The practice is difficult and the possibility is relatively low.


A banking insider told reporters that from the perspective of the cb law, the challenge this model faces lies in article 3 of the CB Law. "This article stipulates the business scope of commercial Banks, but securities business is not one of them. Of course, section 14 of this article also stipulates that Banks may operate other businesses approved by the banking supervision authority of the State Council. However, the securities business involves a general pattern of separate operations and separate supervision, so it is not easy to obtain approval."


Secondly, the bank holding brokerage model, that is to say, the commercial bank as the parent company, its shares or holding securities companies. This idea actually covers two paths of new establishment and participation and control through capital operation. Some brokers believe that this path can steadily promote mixed operation, is the most practical and operational mixed development mode at the present stage.


New Times chief economist Pan Xiangdong told reporters that the commercial Banks' new brokerage model in the short term is difficult to constitute a substantial impact on the existing brokerage; In the long run, as commercial Banks gradually improve the business model of mixed operation, it will have a substantial impact on small and medium-sized securities companies. However, it may take a long time for such a model to build aircraft-carrier securities companies. The merger and reorganization mode is easier, for the merger and acquisition of securities is good. But either way, it will not have a big impact on the existing industry structure.


The challenges to this model are also real. According to Article 43 of the Commercial Banking Law, commercial Banks are not allowed to engage in trust investment and securities business within the territory of the People's Republic of China, and they are not allowed to invest in non-self-use real estate or in non-bank financial institutions and enterprises, except as otherwise stipulated by the state.


Despite the explicit ban, commercial Banks' desire for brokerage licences has not abated. The head of an investment banking department at a major state-owned bank told reporters that the bank had lobbied regulators on several occasions to apply for a brokerage license, but different regulators were not unanimous in their views on the matter.


Discussions in industry and academia are commonplace. In May last year, Li Feng, general manager of icbc's investment banking department, published a signed article entitled "Commercial Banks should be encouraged to carry out equity investment" in China's finance.


It is clearly pointed out that some major commercial Banks should be appropriately supported with mixed business licenses. Li suggested that the regulatory authorities could consider at an appropriate time and in an appropriate way to give some large commercial Banks license access support for securities companies, trust companies, fund companies and other aspects needed to carry out mixed business operations.

The third mode is the financial holding platform mode. The reporter noted that China already has financial holding platforms represented by Everbright Group, China Merchants Group and Ping An Group. These platforms have banking, securities, insurance and trust licenses, follow the regulations of the central bank on financial holding companies, and strictly implement separate operations at the subsidiary level. Everbright securities rose recently, China Merchants securities is such securities. Some people in the industry believe that although the financial control platform model is not a new development model, the bank's acquisition of brokerage licenses may further enhance internal coordination.


But there are people in the brokerage said, these are all based on simple and logical guess, in the actual forward is much complicated, such as brokerage, net assets yield significantly lower than the bank, from the perspective of the market, Banks pay big money to buy a not equal to its own assets, can realize the business synergy value and return on equity has increased, both sides have yet to be further evaluated.


The question of compensation remains to be resolved


Industry insiders interviewed also said that even if the institutional barriers are removed, some institutional barriers will need to be addressed in the future. There are still more details to be polished in the concrete management after the realization of mixed operation.


"The securities industry is highly market-oriented, so we need to properly handle the relationship between internal coordination and marketization," a broker familiar with the banking supervision mode told reporters. On the one hand, it relies on internal coordination, that is, sharing the bank's customer resources and business resources. The other is to match the market in terms of management structure and compensation."


Among them, the former problem can be bound by administrative instruction or assessment means, but the incentive mechanism is a difficult point. "The pay is too low, the brokerage can't keep people; The pay is higher and the mother bank is watching." The brokerage said. There is also the issue of resource allocation. "Such as bonds and short - term financing and other businesses, Banks have developed, if the establishment of a new brokerage, these businesses can transfer to the brokerage?"


"In general, it's about managing past, present and future relationships, as well as internal synergies and external marketization, which, if handled well, complement each other." The above brokerage personnel believe.

Source: Securities Times Net by Luo Keguanzhang Tingting