262b yuan financial bonds for MSEs approved by June (2)

Enthusiasm for issuance was high for a time.

It is obvious that banks will make some profits if they give a positive response to issue financial bond for MSEs.

According to the statement for the third quarter released by listed banks, among the released data of loan-to-deposit ratio, the loan-to-deposit ratios of 6 banks by the end of the third quarter rose compared with that by the end of the second quarter. Although there is a dispute for canceling regulation of loan-to-deposit ratio or not, the rising loan-to-deposit ratio brought pressure to commercial banks. Financial bond for MSEs is solution for banks to relieve the pressure, because such kind of financial bond is not included in the loan-to-deposit ratio calculation.

Supplementary Notice makes clear that for commercial banks approved to issue financial bond for MSEs, if the bond is for loans to MSEs with total single credit no more than RMB 5 million yuan, it can be deducted from the numerator items when calculating "adjusted loan-to-deposit ratio for MSEs". For banks, issuance of financial bond for MSEs expands the capital source of banks, but occupies no incremental loans, so most banks favor it.

In a state-owned large commercial bank, a director of Department of Small-sized Enterprise of Guangdong Branch says that the cost of issuing financial bond for MSEs is higher than that of taking deposit, but it is beneficial to the loan-to-deposit ratio index. Banks need to balance between them. For small- and medium-sized banks with pressure in deposit taking and relative financial strain, they may prefer to issue financial bond for MSEs.

Li Mingxian, president of Guangdong Development Bank, hoped in a speech at the theme forum of the 9th China International Small- & Medium-sized Enterprises Fair (CISMEF) on September 22 that regulatory authority could give more support for banks to issue financial bond for MSEs, besides the current tax preference and government should offer a more complete guiding plan to small- and medium-sized enterprises so that it is easier for them to obtain financing.

It is generally known in the industry that small- and medium-sized banks are faced with more serious liquidity pressure. Issuance of financial bond for MSEs is a response to the policy of supporting MSEs and what's more, it can improve the structure of assets and liabilities and relieve the pressure of "alarming" loan-to-deposit ratio.

Moreover, for banks, issuance of financial bond for MSEs is also helpful for profit increase. An analyzer in Huatai United Securities once said that for China Minsheng Bank, the issuance interest rate of the first 5-year RMB50 billion yuan financial bond for MSEs was about 5 percent last year. Financial bond could replace the bank's capital source with high cost. Presently, the most effective replacement was for long-term contracted deposit and at that time, the interest rate of 5-year contracted deposit was about 6.5 percent, so the issuance of financial bond contributed to increase the net interest margin.

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