illustration / Lina
Special contributor / Chen Chengyu (Vincent Chan)
In recent years, mainland real estate companies are affected by the "three red lines" policy is weak, and they have been downgraded by three major international rating agencies in a record-breaking manner or are expected to take advantage of the situation.
The recent "16 Measures for Rescuing the Market" by the Central Bank is the extremely strong support policy of real estate companies, supporting high-quality real estate companies to issue bond financing, promote professional credit enhancement institutions to improve overall financial health, and provide credit enhancement support for the issuance of bonds of real estate companies facing short-term difficulties. According to China Industrial Economic Information Network , the "three arrows" of real estate financing are credit support tools, bond financing support tools, and equity financing tools, providing great support for the stabilization and recovery of the real estate market.
The author's November article "National Economic Security and Finance and Credit Rating" pointed out that the policy combination of "Three Arrows" supports private enterprises to expand financing, open up bond financing channels for private real estate companies, and is beneficial to restoring the confidence of private real estate companies. However, debt financing alone cannot overcome difficulties quickly for the real estate industry, so the acceleration of the "third arrow" is of great significance. Zhang Bo, director of the branch of 58 Anju Real Estate Research Institute, said that through the efforts of equity financing, real estate companies will effectively promote solutions to fund problems, give the industry a key "respite" opportunity, and accumulate energy to travel through difficulties.
On the other hand, Hong Kong Monetary Authority ("HKMA") issued a circular to accredited institutions at the end of last month, stating that in view of the limitations of resources caused by the epidemic and the re-priority allocation of the industry, after consulting market opinions and referring to the revisions made by some major jurisdictions, banks have implemented the requirements of "Pakistan III" on credit risk , operating risks, and minimum risk weight ratio of residential real estate loans. The implementation time limit will be from July 1 next year, and will be postponed by half a year to no earlier than January 2024.
new standards such as market risk and credit risk assessment adjustment (CVA Risk), shall also be implemented no earlier than January 2024. The implementation timetable for banks to implement the final reform plan for the Basel III (hereinafter referred to as the Bath III) has also been postponed due to various challenges.
The author noticed that since 2013, the HKMA has implemented the capital standards of the Basel III in Hong Kong, which requires locally recognized banks to calculate credit risk burdens on capital adequacy ratios, and must refer to the so-called recognized external credit assessment institutions' debt ratings. Therefore, banks regulated by the HKMA must refer to their debt ratings to meet regulatory needs. External credit rating agencies include S&P , Moody's, Fitch Japan Gefu Investment Intelligence and even ICRA Limited (ICRA) - a local rating agency in India. Among the credit rating agencies, there is no credit rating agency in our country. Coincidentally, the Mandatory Provident Fund Scheme Authority (“Provisional Fund Bureau”) Part I - Licensing Guidelines I.9 Approved Credit Rating Institutions, which are (a) A.M. Best Company; (b) Fitch International Ratings Limited; (c) Moody’s Investor Services Company ; (d) Rating Investment Information Center (Japan) and (e) Standard & Poor’s. There are also no credit rating agencies in my country's own credit rating agencies among the approved credit rating agencies.
In Hong Kong, under one country, two systems, Chinese banks regulated by the HKMA are one of the largest groups in investing in Chinese dollar bonds, especially dollar bonds in the municipal investment industry. Most regulated banks and even the Provident Fund Bureau will refer to the HKMA standards to establish an internal rating system, but it does not mean that the standards recognized by the HKMA will be automatically adopted by relevant institutions, such as the ratings given by some rating agencies in Japan and India. However, if the HKMA does not have the recognized standards, it will be more difficult to adopt and use by regulated banks and relevant institutions.
The author interviewed a senior rating agency practitioner and said that if the HKMA standards do not recognize the ratings of Chinese credit rating agencies, it will be more difficult for regulated banks to refer to the ratings of Chinese credit rating agencies in their internal rating systems.Looking ahead, with the twenty major opportunities, the HKMA should consider domestic credit rating agencies to join the competition and guide the market before and after the implementation of the "Pakistan III", and connect with domestic regulatory agencies to strengthen the interconnection of credit information, strengthen the protection of national economic security, in order to prevent the risk warnings that are not completely unreal or otherwise intentional by foreign capital will affect the China-Hong Kong financial market.
At the end of the article
The author pointed out in the article "The situation in the Taiwan Strait under one country, two systems and the domestic financial crisis " in August this year, and pointed out that the three standards proposed by the Ministry of Housing and Urban-Rural Development for financing of real estate developers from 2021, namely the "three red lines" policy, credit rating agencies manipulated by foreign capital such as Moody's and S&P have further fueled the fire, causing the voice of domestic real estate companies to extend their debts and even bankruptcy to continue and accelerate.
Chen Chengyu (Vincent Chan)
Author Profile
Chen Chengyu (Vincent Chan), a member of the city think tank "Just Talk", a recognized financial planner in Hong Kong, an Australian management accountant , a member of the Hong Kong Institute of Housing Managers and a member of the Internet Professional Association.
Copyright Statement
This article was published in "Thinking about Hong Kong". The author of the article, Vincent Chan, author of the article, author of the "China Federation of Social Security" headline account , was authorized to be exclusively released on the Toutiao platform.
The first media of Hong Kong published in Hong Kong is a platform for online theory based on Hong Kong, and also provides news information. Its goal is to invite experts, scholars, representatives from all walks of life to publish fair, in-depth and visionary discourses on different issues in Hong Kong; coupled with the editor's exclusive interviews and objective comments, it gathers folk wisdom to jointly promote serious thinking and discussions on Hong Kong's future, mainland opportunities and international situation.
