On April 12, the Shanghai and Shenzhen stock exchange held a “Symposium on credit protection tools to support bond financing of private enterprises”. Representatives of relevant business lines of China Securities Regulatory Commission, China Clearing, securities and Gold Corporation and 13 securities companies participated in the video conference. This meeting is an important measure to thoroughly implement the decision-making and deployment of the CPC Central Committee and the State Council and the work requirements of the CSRC on “improving the bond financing support mechanism of private enterprises and enhancing the quality and efficiency of serving the development of private economy”.
improve the financing support mechanism and optimize the financing environment of private enterprises
The relevant person in charge of the bond Department of the CSRC pointed out at the meeting that the CSRC actively supports all parties in the market to play the role of credit protection tools in supporting the financing of private enterprises, play the role of market-oriented credit enhancement, encourage market institutions and policy institutions to provide credit enhancement support for private enterprise bond financing by creating credit protection tools, launch combined credit protection contract business as soon as possible, and optimize the repurchase financing mechanism, Appropriately relax the access threshold of private enterprise bond repurchase pledge library protected by credit.
At the meeting, the Shanghai and Shenzhen Stock Exchange respectively introduced the recent work in supporting private enterprise bond financing and the development of credit protection tool business. The Shanghai and Shenzhen Stock Exchange said that it would guide the market to repair its investment confidence in private enterprise bonds, improve the financing environment of private enterprises and help private enterprises develop healthily through market-oriented credit protection tools.
Citic Securities Company Limited(600030) , Guotai Junan Securities Co.Ltd(601211) , China International Capital Corporation Limited(601995) and other participating securities companies spoke one after another and shared their practical experience in supporting private enterprise bond financing through credit protection tools. The above institutions believe that supporting private enterprise bond financing is necessary to serve the national strategy. The practice of “bond issuance + credit protection” shows that through this scheme, the bond issuance of relevant enterprises has achieved relatively good results, the financing efficiency has been significantly improved, and the financing cost has been optimized to varying degrees.
exchange actively explores the pilot of credit protection tools
The Shanghai and Shenzhen Stock Exchange has always been committed to providing a more fair and smooth financing environment for private enterprises and continuously improving its ability to serve the real economy. Since 2018, the Shanghai and Shenzhen Stock Exchange has continued to actively explore and carry out the pilot of credit protection tools, successively launched the business of credit protection contracts and credit protection vouchers, and jointly launched the pledge repo business of credit protected bonds with China Clearing, which has played a positive role in supporting the bond financing of private enterprises.
Taking the Shanghai Stock Exchange as an example, by the end of March 2022, the Shanghai Stock Exchange had created 197 credit protection instruments, with a nominal principal of 11.517 billion yuan and a total of 44.045 billion yuan of supporting bond issuance. Among them, 142 credit protection contracts were created, with a nominal principal of 7.758 billion yuan and a total of 28.36 billion yuan in support of bond issuance; 55 vouchers were created, with a nominal principal of 3.759 billion yuan and a total of 15.685 billion yuan in support of bond issuance.
Guotai Junan Securities Co.Ltd(601211) securities vice president Luo Dongyuan said that as China’s economy enters the transition period, credit default events are increasing, and some enterprises, especially private enterprises, have financing difficulties and high financing costs. Bond issuing enterprises have a real demand for underwriters to provide them with credit enhancement services. At the same time, in addition to selling positions in the secondary market, bond investors lack effective credit derivatives for credit risk control, which also limits the financing of private enterprises to a certain extent.
In Luo Dongyuan’s view, the credit protection tool business of the exchange provides a better solution to the above problems, which can be described as a win-win situation for investors and issuers. On the one hand, credit protection tools can effectively control credit risk, slow down capital occupation and optimize credit management for investors; On the other hand, the business can improve the financing environment of small and medium-sized enterprises to a certain extent and consolidate the goal of financial services to the real economy.
“The exchange’s credit protection tool business has proved its value in promoting private enterprise bond financing through practice, and the market has responded well. As a member of private enterprises, Red Lion holding group will participate more in the exchange’s credit protection tool business to provide support for the better development of enterprises.” Representatives of Red Lion holding group said.
