What Are the Ramifications of the ICBC Trust Bailout?

The media still plays up the 7% return from the trust, but this is down from the promised higher yield. In the second to last paragraph of the article, an analyst explains the result: the unwritten guarantee of trust products is broken and with only ￥236 billion in equity, the industry cannot back a ￥5 trillion shadow banking system. Another analyst says yields will decline as investors place a larger emphasis on risk.

There will be no lack of credit in the Chinese financial system, but there will be a lack of credit for the riskiest borrowers. Whether that sets off a chain reaction is the ￥5 trillion question. And even if the PBOC can bail everyone out, the yuan will sink, putting more pressure on emerging market economies.


"Jin Cheng to open the 1st" guaranteed interest of 7% gilded just against unbeaten

Also get the principal concern of CCT "sincerity to open on the 1st of gold" the ultimate way to end a third-party disk access, trust rigid payment undefeated "gilded" is maintained, investors experienced a post-fight.

Many accept the Southern reporter interviewed industry insiders believe that "honest to the gold No. 1" greater sense of honor that triggered the crisis in the industry for a discussion of the Trust rigid payment, insiders revealed that a large amount of someone's influence over the surface wide, was "honest to gold No. 1" does not become the main reason for breaking the rigid honor, and has been, is deemed trust industry "hidden rules" rigid cashing industry has been under pressure to allow the trust and the trust industry caused long-term risk and pricing distorted situation, can not long exist. The "honest to the gold No. 1" triggered payment crisis has become an investor in educational opportunities --- "zero-risk, high-yield" myth might be broken at any time.

Annual yield is still up 7%

Related to 700 investors, the size of funds involved up to 3.03 billion yuan of "sincerity to open on the 1st Gold" payment crisis was finally settled. In signing a contract, commitment willing to give up part of the interest after the third year, and some investors have access to the principal before the New Year.

Trust with interest charge Li Yang in an interview with Southern reporters said that after the problems in the trust, conduct recovery by walking lawsuits channel approach for a long time, wide involves not conducive to revitalize the trust assets, the use of third-party disk access mode able to minimize the loss of items, will also minimize the impact.

And for the final rehabilitation programs, running around the past month, most investors anxiously waiting could accept. An investor from Guangdong Yao told reporters the South, the inception of the project, originally expected annualized rate of return of 9% -11%, with the rate hike after the opening, its expected rate of return by 0.5%. That is 9.5% ~ 11.5. In the past three years, Mr. Yao was awarded the first interest income of approximately 9.3% in the second year to obtain interest income of approximately 11%, while the end of 2013, only 2.8% of the interest income received. So calculated, the Trust plans to annualized three-year average yield of about 7%.

"Although the annual yield of the previous agreement did not so high, but keep the principal and trust income does not act as principal, should be considered a better solution." An investor in Beijing on Southern Reporter said so.

It is reported that, before this, many industry insiders have been close attention to the development of this case. Wang Kai Yuan Peng, director of the wealth of investment analysis in an interview with the South are reporters, said: "This case subsequent to solve other problems of the Trust will serve as a reference." And a third-party trust industry researcher, said in an interview, many industry In its communication executives are hopeful, "honest to the gold No. 1" can tear a hole in the Trust rigid payment, so that the trust industry risk pricing regression central value.

However, from the last "honest to the gold No. 1" disposal program, despite the loss of part of the interest of investors in the third year, but was still annualized revenue of around 7%.

"In the regulatory view, honest to open on the 1st of gold is not the best time to break." For the final solution, these third-party trust industry researcher Southern Reporter said, for regulatory purposes, up to 30 billion project to break payment of a rigid rule, ramifications and social impact too.

The risks and benefits of pricing distortions

After the "honest to the gold No. 1" basically solved the problem, but its cause behind investors and industry insiders discuss the Trust for payment of rigidity.

"In fact, the purpose of the trust is not a legal obligation to honor the rigidity." Puyi wealth of Southern Reporter Fan Jie analysts said rigid cashing in fact no legitimacy. According to "Trust Law", trust income trust scheme can not promise, nor can fulfill obligation to compensate the loss of the normal trust scheme, not only can not be no rigid payment data, and contrary to the law of trusts no rigid constraints.

It is learned that in the March 1, 2007 implementation of the "trust management approach" clearly provides that conduct trust business trust, the trust property against loss should not promise or guarantee a minimum income. But throughout the past period of time, project risk exposure incident Trust, the final processing results in large part by the Trust or "fallback" to advance its own funds or by the investor's principal income.

In this regard, a number of people in the industry in an interview with Southern reporters said that close to 10% of the average annual yield, high-income trust investors get smaller but bear the investment risk, "the benefits and risks of the other" investment in Under the law, trust products "zero risk" Understanding is a freak, but also caused a situation distorted pricing of risk and return.

For the cause of China's Trust rigid payment, Fan Jie believes that the root cause for the Trust is now part of the payment question of trust "class deposit" operational thinking --- Trust trustee with or without the obligation to do, all of Trust in accordance with the contract time of booking, the expected rate of return and other conditions Trust income distribution can not shirk responsibility. Because trust is a formal financial institutions, have a higher credit rating, investors will trust scheme as a complete substitute for deposits.

In addition, he specifically pointed out that even though the law clearly stipulates the obligation to honor the trust did not rigid, but from regulators idea of ​​view, since "Jinsin Trust dairy plan," regulators basically can not trust the Trust income distribution as expected phenomenon of zero tolerance. But since 2010, with the increase in trust management trust scheme, regulators repeatedly below, calling attention to "honor" the problem, ensure that the "honor."

"Trust has to raise income from the trust as part of risk provisions, the result is a trust which leads to a higher rate of return must find investment projects." Fan Jie noted that profitability is closely related with the risk that the current trust project the risk is there, usually commercial banks can not loan projects. This direct result is that one side is the trust deposit products as an alternative, required to achieve a rigid payment, on the other hand it is the project due to the need to take the high trust income, and tend to look for riskier projects.

Fan Jie believes that should change the trust "as long as there is no problem cashing problem" regulatory thinking, to shift the focus from the results of the regulatory supervision of the regulatory process up to strengthen the trust is strictly qualified investors access, whether to perform careful management obligations, whether to fulfill disclosure obligations and whether the occupation of the principal beneficiaries of the regulatory interests. Trust should strengthen their operational risk controls, to prevent the risk of spread to a single project or other proprietary business trust scheme.

However, he also pointed out that, although the industry has a lot of dissatisfaction with the rigidity of honor, but at least in the next few years, investors still trust those products are safe, the courage to bear the fiduciary responsibility of the trust, and trust is unlikely because the number of single- Business disposal and offend investors.

Risk Warning

Trust is approaching an inflection point, just ready to break the unspoken rules against

A joint-stock bank private banking division of the Ministry of Finance said Southern Reporter, educational opportunity, "honest to the gold No. 1" payment crisis caused investors --- has become a "zero-risk, high-yield" myth may at any time be broken.

In fact, despite the "honest to Gold No. 1" to third-party disk access way to end to make payment of the Trust rigid undefeated "gilded" is maintained, but many analysts agree that this year, the rigidity of payment crisis of trust may at any time broke out.

AVIC Securities analyst Yang Pengfei believe that sooner or later appear breach of trust products. Focus on the reform of the financial system regulators in introducing reasonable risk-return pricing benchmark, the default risk of future high-risk products detonated by means of mobility will be an important piece to guide financial system reform.

Haitong Securities analyst Jiang Chao believes that trust rapid expansion, the unspoken rules will get rid of the rigid payment. He noted that in the past trust the products have rigid honor the "hidden rules", Finance Trust category often contain implicit guarantee investors expect the trust, but trust big expansion in recent years, assets under management have exceeded rigidity can trust payment capabilities. Industry 235.6 billion yuan equity financing carries a 4.9 trillion trust class, fallback or powerless.

Wang Peng analysis director Kai Yuan wealth investment in the South have told reporters that this year the trust industry either yield or scale will be the turning point, where, in order to lower just against not break the unspoken rules to ensure project safety, yields have to slide trend, and the scale will also be the case slowdown appears. "For investors, the difficulty and risk selection trusts have increased." Said Wang Peng, and for trust, the embarrassment is that one needs to maintain a high income retain investors, on the other hand how do wind control .