Home » China Securities Regulatory Commission: Prevent stock pledge risks to ensure smooth operation of financing business_Oriental Fortune Network

China Securities Regulatory Commission: Prevent stock pledge risks to ensure smooth operation of financing business_Oriental Fortune Network

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China Securities Regulatory Commission Addresses Stock Pledge and “Two Financing” Risks

The China Securities Regulatory Commission (CSRC) recently addressed the risks associated with stock pledge and “two financing” financing businesses. A spokesperson for the CSRC responded to reporters’ questions on February 5, stating that the overall risk of stock pledges in the Shanghai and Shenzhen stock exchanges has significantly decreased compared to 2018. The commission assured that it will closely monitor and take effective measures to prevent stock pledge risks.

According to the spokesperson, the overall risk of the “two financing” financing business is also controllable. To maintain the normal order of the market, the CSRC will guide securities companies to provide comprehensive customer services and maintain the flexibility of the liquidation line. This will be achieved by extending the insurance call time and dynamically lowering the liquidation line to reduce forced liquidation risks and market pressure. The CSRC is committed to strengthening the daily supervision of the “two financing” financing businesses to ensure the smooth operation of the financing business.

The CSRC has implemented a guidance mechanism to increase the linear elasticity of closing positions. Since 2018, the commission, along with relevant departments, has worked to resolve stock pledge risks, resulting in a significant decrease in the overall risk of stock pledges in the Shanghai and Shenzhen stock exchanges.

As of February 2, the proportion of stock pledged market value in the two cities’ total market value has dropped from 10.51% at the peak in 2018 to 3.38%. The balance of pledged financing has also significantly decreased, from 2.69 trillion yuan to 1.59 trillion yuan. Additionally, the number of listed companies with the largest shareholder’s pledge ratio exceeding 80% has dropped from 702 to 227.

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While the CSRC has observed an increase in supplementary pledges by major shareholders compared to last year, these are considered protective measures to ensure financing security rather than forced liquidation risks.

The spokesperson emphasized that the commission will continue to monitor closely and take effective measures to prevent stock pledge risks. They also highlighted that the scale of stock pledges has continued to shrink, and the proportion of A-share market capitalization has continued to decline.

Furthermore, the CSRC is working to strengthen daily supervision of “two financing” financing businesses, with the average maintenance guarantee ratio of the entire market declining. The commission assured that the overall risk is controllable and that effective measures will be taken to ensure the smooth operation of the financing business.

The information in this article was sourced from the China Securities Journal.

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