Brokerage risk reserve reduced
By Louise Ho |
April 14, 2012, Saturday
|
Print Edition
Print Edition
CHINA Securities and Regulatory Commission yesterday reduced the proportion of capital that brokerages are required to reserve against future risks.
Officials said this measure will help brokerages expand their business. This is the first time the regulator has lowered the proportion.
In 2008, to tighten risk control, the securities regulator required brokerages to set aside capital as risk reserve.
Yesterday's amendment lowered the proportion of risk reserve capital requirements on their business, including self-operated and asset-management business.
The proportion of risk reserve capital that must go to self-operated equities and fixed-income securities is now 15 percent and 8 percent, respectively.
Previously, brokerages had to put 20 percent into self-operated equities and 10 percent into fixed-income securities.
"By lowering the risk reserve capital, we hope this can help expand the scope of brokerages' business and support the industry's development," an official from the securities regulator said.
After the adjustment, about 40 billion yuan (US$6.35 billion) from the 100 billion yuan risk reserve capital of the industry will be released to brokerages, the official said.
The regulator has also lowered the proportion of risk reserve capital for brokerages that perform particularly well.
Those that receive a top rating for three consecutive years will be allowed to reserve 0.4 times of a required proportion, compared with 0.6 times previously.
"Top brokerages can serve as a role model for the industry," the official said.
Brokerages have improved their abilities in risk management and internal control since the regulation on risk reserve capital was put in place, the official said.
China's weak stock market last year has hurt the earnings of brokerages. The Shanghai Composite Index fell 22 percent in 2011.
Officials said this measure will help brokerages expand their business. This is the first time the regulator has lowered the proportion.
In 2008, to tighten risk control, the securities regulator required brokerages to set aside capital as risk reserve.
Yesterday's amendment lowered the proportion of risk reserve capital requirements on their business, including self-operated and asset-management business.
The proportion of risk reserve capital that must go to self-operated equities and fixed-income securities is now 15 percent and 8 percent, respectively.
Previously, brokerages had to put 20 percent into self-operated equities and 10 percent into fixed-income securities.
"By lowering the risk reserve capital, we hope this can help expand the scope of brokerages' business and support the industry's development," an official from the securities regulator said.
After the adjustment, about 40 billion yuan (US$6.35 billion) from the 100 billion yuan risk reserve capital of the industry will be released to brokerages, the official said.
The regulator has also lowered the proportion of risk reserve capital for brokerages that perform particularly well.
Those that receive a top rating for three consecutive years will be allowed to reserve 0.4 times of a required proportion, compared with 0.6 times previously.
"Top brokerages can serve as a role model for the industry," the official said.
Brokerages have improved their abilities in risk management and internal control since the regulation on risk reserve capital was put in place, the official said.
China's weak stock market last year has hurt the earnings of brokerages. The Shanghai Composite Index fell 22 percent in 2011.
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