What impact will the implementation of new regulatory rating regulations have on the trust industry?
On the evening of November 16, in order to strengthen the differentiated supervision of trust companies and reflect new regulatory standards and guidance in regulatory ratings, the State Administration of Financial Supervision revised and issued the “Interim Measures for the Supervision Rating and Classified Supervision of Trust Companies” (hereinafter referred to as the ” “Measures”) shall come into effect from the date of promulgation.
The “Measures” consist of six chapters and 35 articles, including general principles, regulatory rating elements and rating methods, regulatory rating organization and implementation, systemic impact assessment, classified supervision and supplementary provisions, and regulate the hierarchical and classified supervision of trust companies. The regulatory rating cycle for trust companies is one year, and the evaluation period is from January 1 to December 31 of the previous year. In principle, all the rating work for the previous year should be completed before the end of April each year.
“Ratings correspond to graded and classified supervision, which has very obvious linkage and synchronicity.” Xing Cheng, director of the Taikang Trust Research Institute of SDIC, told a reporter from Securities Daily: “In the future, based on the rating classifications, six different levels will be Trust institutions must implement classified supervision and differentiated supervision. The business scope, business fields and innovation qualifications of trust companies at different levels will be different.”
Business transformation weighting is a highlight
The regulatory rating results of trust companies are divided into levels 1 to 6. The larger the value, the greater the risk of the institution and the higher the degree of supervision required.
Xing Cheng said that the rating results are divided into six levels, and the biggest highlight is the increased weight of business transformation, which has an important role in promoting and clear policy guidance for the current trust industry to accelerate business transformation under the background of new classification supervision.
The “Measures” clarify that if a trust company conducts multiple or large-scale channel businesses for providing regulatory arbitrage for other financial institutions during the evaluation period; sells trust products to unqualified investors multiple times; and issues a large number of full commitment letters to trust product investors, If a company launches a new non-standard capital pool business, violates the requirements of the new asset management regulations for rigid redemption of trust products, or engages in unapproved business in violation of regulations, the regulatory agency should lower its initial assessment result by one level.
If a trust company intentionally conceals major matters or problems from regulatory agencies during the evaluation period, causing serious consequences; if it conducts multiple or large amounts of illegal related-party transactions, causing the company’s assets to be occupied, or seriously damaging the legitimate rights and interests of investors; if a major criminal case occurs , causing major business risks or adverse social impacts, the regulatory agency should lower its initial assessment results by two levels. However, for trust companies that take the initiative to eliminate or reduce the harmful consequences of criminal cases discovered during self-examination, they can only be downgraded by one level.
A senior expert in the trust industry who did not want to be named told a reporter from Securities Daily that overall, the core means of regulatory rating is to provide more supervision to high-risk trust institutions, guide trust companies to operate in compliance, and fully realize that The importance of risk management.
Xing Cheng said that the “Measures” reflect the clear-cut principle of “rewarding the good and punishing the bad”. According to different rating classification standards, the standards for regulatory fees and the standards for payment of credit insurance funds are also differentiated. This is also an important manifestation of the linkage of the “Measures”.
Encourage companies to strengthen their capital strength
The “Measures” clarify that if a trust company has one of the following circumstances during the evaluation period, the regulatory agency can increase its initial evaluation score, including: for companies that continue to operate normally, the company’s registered capital increases by more than 10% (inclusive); to assist the regulatory agency in evaluating Risk disposal by other financial institutions; other situations recognized by regulatory agencies.
The above-mentioned senior experts in the trust industry said that increasing registered capital and increasing ratings will help guide shareholders to continuously increase capital investment in trust companies, and will help strengthen risk-taking capabilities and net capital strength. At the same time, it helps to consolidate the authenticity of net assets and the ability to resist risks.
Industry insiders told a reporter from Securities Daily that the two additional points added in the “Measures”, especially the capital increase, send a signal that the regulatory authorities hope that trust companies will increase their capital and enhance their risk resistance. Most of the downgraded items are prohibited items highlighted by regulatory authorities, reflecting the decline in regulatory tolerance for related matters.
“Previously, many trust companies had very high ratings before the risk broke out. The reason behind this was the distortion of the trust company’s financial data.” A person from a trust company said in an interview with a reporter from Securities Daily that the “Measures” are regulating and ensuring trust. There are clear requirements for the authenticity and accuracy of company financial reports.
The “Measures” clarify that the regulatory ratings and systemic impact assessment results of trust companies are the basis for implementing classified supervision.
The State Administration of Financial Supervision can appropriately adjust the assessment elements and the specific weight of each element every year based on the industry risk characteristics and business complexity. Trust companies with a total assessment score of 85 or above (inclusive) are deemed to have systemic influence.
Yu Zhi, a researcher at Yongyi Trust, told a reporter from Securities Daily that trust companies with larger business scales will pay more regulatory attention to promote their stable operations. Even if a leading trust company has a relatively high score, it will need to face relatively more regulatory inspections, which can directly strengthen the fiduciary responsibility and compliance awareness of the leading trust company.
Xing Cheng believes that, overall, on the one hand, the “Measures” require strengthened supervision, focused supervision, and personal supervision for trust assets exceeding a certain standard to make them “big and excellent” and “big and strong”; on the other hand, encourage Trust companies are following the path of connotative development, and more institutions are gradually becoming “small but beautiful” and “specialized and sophisticated” differentiated asset management institutions.
