CBRC lowered provision coverage ratio and loan provision ratio regulators to sell any medicine?

  Lower provision requirements, Gesha you excited?[18001] Potential Source: Tan Song Heng Tan Tan market March 6, 2018, the media reported that the CBRC lowered the bank provision coverage ratio and loan provision regulatory requirements, the previous rigid requirements into line requires a floating index – CBRC issued "on the adjustment of the regulatory requirements to prepare commercial bank loan losses" (Yin Jian Fa [2018] No. 7 article), the provision coverage ratio requirement reduced from 150-120% -150%, the loan provision ratio requirements from % down to% -%。   Because of the news, the bond market confidence boost, especially in the interest rate on bonds and bond futures market, multi-head strong impulse will, the bond market rally continued the momentum – expected weakness in the CPI data, January-February general economic and financial data lower-than-expected macroeconomic environment, the value of the bond market fell back on stage。
  However, the provision coverage ratio and loan provision ratio really is something for the bond market, the banking sector exactly what are the implications, we can go to interpret three parts。   First, what is the provision, provision coverage of what is, what is the loan provision rate loan provisions currently Recent regulatory guidelines to follow for 2011 issued by the China Banking Regulatory Commission No. 4 text "loan losses Commercial bank reserves management approach"。 Understood from the literal sense, in fact, belong to the special provisions of the loan loss reserve assets: As the loans are interest-earning assets, primarily commercial banks, but also there is intertemporal risk transfer, in each doing a business when its provision for write-downs preparation is reasonable value。
  In the Banking 2011 4-ri, China Banking Regulatory Commission to explain what is special loan loss provision: "Commercial banks charged to the cost to reserve against loan risk," and in particular that "are not included in the distribution of profits provision for general reserve. "。   If you have some difficulty understanding the literal words, let's give an example: a bank this year, starting from zero, to lend 10 billion in loan yields of 6%, about 3% cost of debt, net interest income was 3%。 That the "ready" (including loan loss provisions and general risk reserve) is how it happened?  A bank's income statement would be so displayed: -3 600 million loan interest liabilities cost one hundred million – billion loan provision (10 billion loan principal loan provision ratio X%) = one hundred million pre-tax profit。
  Provision for loan losses is deducted in here, this is the pre-tax items, cost。 That general risk it?General risk provisions appear in the part of the distribution of profits, we assume a net profit for the bank billion in accordance with the requirements deduct million general reserve, and the remaining one hundred million became undistributed profits。
  Because it is part of the distribution of profits, the profit after tax is divided into "general risk" and "retained earnings" step, which is done in the "owner's equity" in the balance sheet。   This is the difference between loan loss provisions and general risk: the loan loss reserve is special asset impairment due loans as interest-earning assets across the period, there may be some degree of loss in the future, it may be recorded in advance as a loss cost, until the maturity of the loan is no loss, which is part of the loss reserve adjustment will come back; and general banking risk reserve is to deal with various risks, come up with as part of the pre-existing reserves from after-tax profits, not to distribute the profits, until the risk of a chance to make up for the loss of use out。
  Two, one is the proprietary banking financial institutions, a business has all of; one is the cost, will appear in the income statement, the profit distribution is a way, it does not appear in the income statement in。 And most importantly, for banks, loan loss provisions and general risk reserve can be used as credit risk cushion, but the general reserve as a core subject in the owner's equity, are among the most important "core tier one capital banks ": CBRC" Article 29 a commercial bank's capital management approach ": core tier one capital includes paid-up capital or common stock, capital reserves, surplus reserves, general reserve, retained earnings and minority shareholders' capital can count the part。   Of course, the protagonist of this article is to loan provisions, Tell me what you only need to remember "loan loss reserve" is not a core tier one capital on the line。   Know what is the provision of, let's look at two regulatory indicators, provision coverage ratio and loan provisions。
  Provision coverage called the NPL coverage, as the name suggests, is the ratio between loan loss provisions and non-performing loans, there is provision coverage ratio = loan losses / non-performing loans。   Loan provision ratio is also very clear, the ratio between total loans and loan loss preparation, there is a loan provision ratio = Total reserves / loans losses。
Because we are familiar with bad debt ratio (NPL ratio) = non-performing loans / total loans, the loan provision with the provision coverage ratio = X-performing loan ratio。   Into the regulatory requirements and 150%, we can calculate the so-called gold-performing loan ratio:%, keeping the non-performing loan ratio, the above two monitoring indicators has just been completed, is not required to meet certain targets, and the provision of more loan loss provision。   Index is not difficult, submit it is not difficult, the difficulty is how to understand you。
  Second, the provision requires that the release of funds to reduce debt Pull?  Before answering this question, we must first answer the question, reduce provisioning requirements exactly what was released, there is a market research today's interest rates will rise and reduce debt provision requirements linked up and said lower provisioning requirements will release a lot of money out – is it true?  Obviously it is a fake!In fact, whether general or risk provisions for loan losses, we can not release any funds: Because in the provision for general reserve for loan losses or cash will not be damaged when the natural reduction in loan loss provisions required in cash It will not be released。   To put it bluntly, general risk provisions and loan loss provisions are "Provision" category, loans 10 billion, ahead of me before it lost million, the actual included in the balance sheet of loans that is one hundred million。
This one hundred million as the cost was included in the pool of losses – to put it bluntly, the loan loss reserve asset account is artificially shrink the balance sheet of。
  However, according to the identity of the balance sheet, so that the provision for loan losses shrink assets, but liabilities did not change, a direct impact on owners' equity is reduced – due to the loan loss reserve is a pre-tax items, is a cost, and therefore obviously the loss of net profit: including retained earnings, general risk provisions and other subjects。   So, when the indicator loan provision and provision coverage rate is lowered, that is for the banks, the cost of provision of smaller, under certain circumstances operating income, net income would therefore increase the : If the bank does not allocate the extra profit out of it, so much out of the net profit or retained earnings will enter the general reserve and other subjects which enrich the net capital。   Since net capital or net profit growth and reduce the tax burden of the existence of the provision is not exactly the same, but follow this formula: = provision for an increase in net capital reduction of X (1- tax rate)。
  This is interesting, the release is not money, but net capital – substantial net capital of banks allows investment banks to more risk, such as interest rate debt trading (trading assets would increase market risks assumed by banks) and credit debt , investment loans and interbank assets (these assets will increase the credit risk assumed by the bank)。
  So, from this point of view, the bank had net capital, can be carried out more transactions and interest rate debt credit debt, loans, non-standard investments, will therefore form the interest rate debt, in particular, actively traded interest rate debt, Treasury bond futures and credit support; but because it is not directly spread the money, so the stock market is very limited support。
  The above logic explains why bonds rose, rose also rose but today, I can then buy it?  Third, regulators sell drugs?  Why choose regulators provision to reduce the pressure at this point in time the bank?We still have to go and find the cause of the present situation of the banking sector – after all, under the supervision of a strong momentum, and each time retreating regulators, are quite profound meaning。   We first look at the official statement: CBRC Vice Chairman Wang Zhaoxing said lowered provision requirements in order to induce banks to better accelerate the disposal of bad loans now, while banks have more funds to support the real economy。
  We can follow the above formula X = provision coverage rate loan provision bad loan ratio to calculate a new gold-performing loan ratio, since the scope of the loan provision ratio is% -% provision coverage range is 120% – 150%, then the range of non-performing loans ratio of gold becomes 1% -%, that is, gold NPL ratio can be relaxed from% to% of。
  The China Banking Regulatory Commission announced after performing loan ratio since mid-2016 peaked%, year and a half has been maintained in the%。
The digital% from a little distance away from the new standards% farther on, the new provisioning requirements actually relaxed tolerance of non-performing loans of the banking sector。
  You know, the NPL ratio has been a red line indicator regulatory agencies, many banks to drive down non-performing loan ratio, usually choose to zombie companies a way to maintain normal blood transfusion loans, reduce non-performing loan ratio, while the increase of non-performing loans of the banking sector tolerance, to some extent, is to guide the market clearing banks to take the initiative, not to zombie enterprises transfusion。
  On the other hand, loan provision ratio for banks at the end of last year remained at% provision coverage ratio was about 181%, lower standards also encourage banks to clean up bad debts that have emerged – to clean up bad debts of course there will be some degree of loss, but also make provision for clean-up back, to offset the losses caused by cleaning up bad debts。   Therefore, from this perspective, the regulatory agency requirements for the provision of deregulation, one bank exposure to bad debts faster to boot, and second, to encourage banks to dispose of bad work has been exposed, the secondary capital sucked the three banks ( excess loan loss provision) will gradually change its core tier one capital (retained earnings and general reserve), to enhance the bank's ability to resist risks。   Meanwhile, vice-chairman also said that, to make the bank more money to support the real economy – assuming that two consecutive years of regulatory policy, all the outside tables of assets and liabilities within the table to catch it, then remove the "interbank idle", banks industry faces future funding situation should be improved, the only limit to support the real economy, that is, the net capital indicators: while banks in addition to the issuance of common shares, increasing core capital are not many ways, the capital adequacy ratio indicators can not in the case of adjustment, the only surplus, allowing the bank to enrich the core capital, the only loan provisioning。   All in all, the idea of regulatory bodies is very clear, I hope that banks can quickly expose their bad debts, because tolerance of non-performing loans ratio increased; also hope that banks can quickly clean up their bad loans, so as to enjoy the provision of welfare requirements decline ( otherwise, how do provisioning and write-off of the back of it); banks are now more hope to do more business (indicator has been over a lot, do not do the impairment), enjoy welfare policy。   So overall, this is a more favorable interest rate credit debt rather than debt policy, of course, still the most favorable loans。

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