Research On Risk Management Of Debt-for-equity Swap Institutions In Banking System

In recent years,China’s economy has entered a new stage characterized by "three phases",namely,the shift of growth speed,the painful period of structural adjustment and the digestion period of early stimulus policies.The state has enacted a series of policies accordingly,including lowering the GDP growth target and supply-side structural reform,and so on.It is an important task of supply-side structural reform to "three eliminations,one reduction,one supplement".Deleveraging is one aspect of the "three eliminations",and "market-oriented debt-for-equity swap"is an efficient method to resolve Banks’ non-performing assets and reduce the leverage ratio.In the process of debt-to-equity swap,the implementing institution of the banking system is a very important participant.The risk management ability of implementing institutions is directly related to the quantity and quality of debt-to-equity swap projects,and then affects the effect of deleveraging.Therefore,it is necessary to explore and study the risk management of debt-for-equity swap implementing institutions in the banking system.For the subject of risk management of debt-for-equity swap implementing institutions in the banking system,the following four difficulties are focused,that is,the lack of experience which can be referred,the relevance and complexity of risks,the hardships of avoiding moral risks and the easy deviation from the principle of debt-for-equity swaps.Based on it,the article chooses the agency cost theory,financial contract theory and the MM theory as theoretical basis,the Nanjing Iron&Steel debt-for-equity case as an example,combs the risk management measures of implementing agencies(Jianxin Investment)in the case,analyses advantages and disadvantages of the risk management solution of Jianxin Investment,and finally,summaries the valuable experience and harvests the enlightenment.Through the inspiration of cases,this paper makes the study go deep into the theoretical level.The main content includes three aspects:risk hedging,diversification and undertaking.The feasibility,risk return and operation strategy are studied in detail in each aspect.The results show that a good risk management scheme is a necessary condition for the success of debt-equity swap,and the key to the construction of risk management mechanism are portfolio management,equity exit arrangement,risk sharing and risk bearing mechanism.Based on the research conclusion,this paper puts forward the countermeasures and suggestions for constructing the risk management mechanism of the implementing institutions,that is,strengthen market research,improve organizational efficiency,and improve portfolio investment and management ability;establish risk sharing mechanism by introducing new investors;improve the risk bearing mechanism by establishing the self-insurance system;innovate the path of equity withdrawal by adopting the "multi-step" method of equity exit.