[Pu brother has something to say] This Friday, the Securities and Futures Commission (SFC) announced the revision of the "Measures for the Administration of Risk Control Indicators of Securities Firms" and the supporting rules (hereinafter referred to as the "Measures" and the supporting rules) to the community for public consultation, immediately triggered the market heated debate. One of the adjustments regarding the leverage ratio indicator was also interpreted by many as the SFC encouraging securities firms to"leveraging (i.e. buying shares on borrowed funds)"The Some financial media4moon9Japan learned on Saturday from sources at the Securities and Exchange Commission (SEC) that market participants are interested in brokerage firms"leveraging (i.e. paying off part of a leverage loan)"The understanding is misinterpreted.

   The main purpose of the optimization of the capital leverage ratio is to bring off-balance sheet businesses such as securities derivatives and asset management, which were not included in the calculation of leverage, under control in accordance with the business characteristics and types of risks of the securities industry, so as to make the risk coverage more comprehensive and the calculation of leverage more reasonable.

    Why the leverage ratio indicator was adjusted
    2006surname Nian7In January, the SEC issued the Measures, establishing a system of risk control indicators for securities companies centered on net capital.2008surname Nian6In January, the Measures were revised. As the organizational structure and business products of securities companies are becoming more and more diversified, and the types of related risks are becoming more and more complex, the SEC decided to revise and improve the Measures again.

There are six main aspects to this revision of the Measures, among which the adjustments relating to the leverage ratio indicator have received great attention.

    This adjustment optimizes the original two leverage control indicators of net assets over liabilities and net capital over liabilities into one capital leverage ratio indicator (core net capital)/(total on- and off-balance sheet assets) and set no less than8%of the regulatory requirements. In addition, the net assets to liabilities target was changed from no less than20%Adjustment to10%The net capital to net assets ratio indicator has been changed from not less than40%Adjustment to20%The

    Change the net assets to liabilities target from no less than20%Adjustment to10%, does it mean to relax the leverage control? In this regard, the SEC responded on Saturday that the notion that leverage controls are being relaxed is a misinterpretation of the indicators.

    The person explained that the current Measures have two indicators of net assets over liabilities and net capital over liabilities that are also leverage control indicators, which both have the problem of double control and do not include off-balance sheet business in the control. After studying and drawing on international experience, the Measures intend to optimize these two leverage control indicators into one capital leverage ratio indicator (core net capital over total off-balance sheet assets), and set a leverage ratio of not lower than8%of regulatory requirements.

    The main purpose of the optimization of the capital leverage ratio is to bring off-balance sheet businesses such as securities derivatives and asset management, which were not included in the calculation of leverage, under control in accordance with the business characteristics and types of risks of the securities industry, so as to make the risk coverage more comprehensive and the calculation of leverage more reasonable.

    After the optimization and adjustment, the original two leverage control indicators should have been eliminated, and given that the current Securities Law specifies that the SEC should stipulate the ratio of the said indicators, the two leverage control indicators will continue to be retained. However, in order to avoid conflict and duplication with the capital leverage indicator, it is proposed to change the net assets to liabilities indicator from no less than20%Adjustment to10%, the future constraints on corporate leverage are primarily through the capital leverage ratio.

    "8%The multiple calculated from the inverse of the capital leverage ratio is not a financial leverage multiple in the usual sense."The above sources said that by capital leverage8%Measured against the regulatory standard and combined with the liquidity metric requirements, the financial leverage ratio is roughly6times around, which is broadly comparable to the requirements of the current approach.

    It is worth noting that the adjustment also reduces the original net capital to net assets indicator, which reflects liquidity, from40%reduce to20%The

    According to the relevant sources of the SFC, this adjustment is mainly aimed at the current Measures aimed at preventing the liquidity risk of the net capital over net assets indicators, the actual target is not sufficient to effectively prevent the liquidity risk problem.

    In order to prevent the liquidity risk that may be caused by the rapid development of the business of securities companies, the Securities and Futures Commission directed the China Securities Association in2014surname Nian2The Guidelines on Liquidity Risk Management for Securities Companies were formulated and issued in January, requiring securities companies to fill in two liquidity risk supervisory indicators, namely the liquidity coverage ratio and the net stable funding ratio.

    where the liquidity coverage ratio is the ratio of high-quality liquid assets to future30The ratio of net cash outflows over days is used to reflect and monitor whether securities firms have sufficient liquidity resources to address short-term (one-month) liquidity risk under certain stress scenarios.
The Net Stable Funding Ratio is the ratio of available stable funding to required stable funding and is used to reflect and monitor whether a securities firm has a stable source of funding to continue operations for more than one year under certain stress scenarios.

    "From a practical point of view, the two indicators are basically in line with the industry's reality and are able to reflect and monitor the industry's liquidity risk. Therefore, it is proposed that the two liquidity risk regulatory indicators be elevated from industry self-regulatory rules to SEC departmental regulations."The said person said that the net capital over net assets indicator should have been canceled after it was replaced by the two liquidity regulatory indicators, but in view of the current Securities Law, it is clear that the SEC should stipulate the ratio of the said indicators and continue to retain the indicator.
However, in order to avoid conflict and duplication with the liquidity regulatory indicator, based on the actual situation, the SEC has decided to change the indicator from no less than40%Adjustment to20%, the company's liquidity risk will be disciplined in the future mainly through the liquidity coverage ratio and the net stable funding ratio.