Frequent Redemption

  Finance and Economics – Frequent Redemption of Subcontracted Funds

  The bank's outsourcing business, which has been leaps and bounds, has been subject to regulatory pressure many times and has already contracted. In addition, in 2017, many banks increased the proportion of equity assets. This year, the stock market was in a downturn, and the general benefits of equity-based subcontracted funds were generally poor. The banks had to continue to shrink the outsourcing layout.

  Of the 1882 “outside” funds, 926 had net redemptions in the first quarter.


  Insiders of a city commercial bank in East China revealed that the recent parent bank issued indicators that the redemption ratio of its subcontracted products exceeded 60%. “One is because the outsourcing benefits are difficult to meet the requirements of the parent bank, and the second is the bank’s MpA regulatory assessment. Never relax.”

  In its view, in 2017, the outsourcing began to be under regulatory pressure, and there have been signs of contraction, and the new regulations have intensified this speed. “Because most of the bank's fund sources are wealth management funds, the new regulations will promote the bank's financial management to gradually transition to net worth products, and its scale will drop sharply, which will lead to a decline in the scale of the subcontract.”

  The product department of a small fund company in Shanghai also bluntly stated that the two major management measures of large-scale risk exposure and liquidity risk of commercial banks have also increased the pressure on redemption of foreign parties, and the redemption of small and medium-sized banks has been more important.

  In the “Management Measures for Large-Scale Risk Exposure of Commercial Banks”, it is emphasized that the balance of a single bank's loan to a non-inter-bank single customer shall not exceed 10% of the net capital, and the risk exposure to a non-industry single customer shall not exceed 15% of the net tier 1 capital. The exposure to a group of non-inter-related customers shall not exceed 20% of the net capital of Tier 1 capital; the exposure to peer single or group customers shall not exceed 25% of the net capital of Tier 1 capital.

  Under this circumstance, banks have to be forced to redeem their peers to meet regulatory requirements.

  In addition, in order to meet the regulatory requirements of the “Measures for the Management of Liquidity Risks of Commercial Banks”, small and medium-sized banks need to actively increase the proportion of deposits and loans, reduce non-standardized and short-term interbank liabilities, and the proportion of inter-bank assets under offline transactions. Therefore, the corresponding pressure for redemption has followed.

  On the investment side, the pressure for redemption is not small.

  According to statistics, among the 1822 fund products that are only defined as “outsourcing”, the average income this year is -0.17%, of which nearly 600 funds have suffered losses, 226 have fallen more than 5%, and some institutions have a relatively high hybrid type. The fund fell more than 20% in the first half of this year.

  In the view of the above-mentioned fund company's product department, in 2017, due to the poor performance of the bond market, the stock market's structural market performance was outstanding, and the blue-chip stocks with lower risk showed a large increase. Many banks gradually increased the equity assets of the subcontracted products. Configuration, the performance of these products will be hit hard this year.

  Among them, there were 926 fund shares with net redemption in the first quarter. The highest net debt redemption fund in the first quarter reached 9.403 billion shares, and the fund's total redemption share in 2017 was also 17.67 billion.

  Strategic adjustment

  What are the plans for the bank to redeem the funds?

  The general manager of a small fund company in Shanghai revealed that the threshold for foreign funds has increased again. It is reported that banks have gradually increased the proportion of indicators for risk and retracement, and put forward higher requirements for bond investment.

  According to the person in the product department of the above fund company, the bank further requested the fund company to strengthen the management of the credit bond risk. Once the thunderbolt will be severely reduced, “because of the greater opportunities in the current bond market, the bank must increase investment in the bond market. proportion, but the default of bonds this year is currently the biggest risk.”

  It is reported that 26 bonds have been defaulted this year, involving a bond balance of 25.378 billion yuan. Any default on a bond will have an irreversible impact on the fund's net worth, and the bank is not willing to take on such a huge risk.

  At present, the market only chose bond transactions with AAA rating or above, and the focus was even on the transfer of government bonds and policy financial bonds. Some institutions did not have strong incentives to buy bonds, and even the act of discounting and selling bonds was ultimately risk-oriented. “But another deficiencies in choosing the AAA rating mark are the simultaneous decline in yields, which makes it harder to get favored by outside agencies.”

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