A Research On China’s Securities Industry Macro-prudential Supervision

After U.S. financial crisis sweeping the globe, countries around the world launched a massive bailout plan and economic stimulus plan, developed and implemented a new financial regulatory reform bill, in order to save the financial system collapsed edge, disposal and to prevent systemic financial risks. Global financial regulatory agencies strengthened cooperation and coordination of the international financial regulatory reform, then the New Basel Capital Accord ("Basel III") came into being. Againsting the characteristics such as pro-cyclical and risk contagion in financial institutions,"Basel Ⅲ" strived to build a macro-prudential financial regulatory framework in order to prevent systemic financial risks and enhance the soundness of the financial system. Macro-prudential financial regulatory framework in "Basel Ⅲ" is based on the commercial banking system supervision, but in mixed operation and functional regulatory financial system in Western countries, the scope of the macro-prudential supervision coved the entire financial system. For the separate operation and separate supervision financial system in China, in the background of global financial regulatory reform deepened and the accelerated pace of the domestic financial institutions consolidated operating, it is of great importance to build macro-prudential regulatory framework covering financial institutions banking, securities and insurance.As the main intermediaries and important institutional investors in capital markets, securities companies’ management behavior is undoubtedly the presence of pro-cyclical characteristics similar to commercial banks in the pursuit of profit maximization. The net capital ratio is the concentrated reflection of the risk business of securities companies. The regression of panel data model which based samples of45Chinese securities companies shows China’s securities companies’ net capital ratio are significant pro-cyclical. Securities companies’ proprietary trading, brokerage and asset management business are also pro-cyclical and the fair value accounting measurement methods as well as external credit rating exacerbated securities companies’ pro-cyclical. Moreover, the copula model analysis which based on8listed securities companies shows that there are apparent up tail and low tail correlation between the stock return rates of China’s securities companies, which show the risk contagious among China’s securities companies. Although "Tobin’s Q value" and the wealth effect of China’s capital market’is not obvious from the relevant research literature and empirical results, its function of broadening the financing channels for enterprises, improving the efficiency of capital allocation and optimizing of industrial structure etc. can’t be replaced. Therefore, it is of very important practical necessity to strengthen the macro-prudential regulation to ease the pro-cyclicality of securities companies as well as prevent infection and spread of the risk of the securities industry in order to enhance the robustness of the securities industry, maintain capital market stability and healthy development and thus to promote macroeconomic stability running.Learning from the "Basel III" macro-prudential measures, China should pay close attention to build and improve macro-prudential framework for the securities industry.In the macro-prudential tools, we can implement counter-cyclical net capital regulatory mechanism, dynamic venture capital preparation and dynamic leverage ratio and in accordance with the international economic situation, macroeconomic and dynamically adjust above three tools combined with the early warning mechanism of securities industry risk to alleviate the pro-cyclicality. Meanwhile, in order to reduce the risks correlation and infectious, we should allocate more supervision resources to key institutions; through the usage of supervision tool such as improvement of the stress testing of the securities companies, improving investor protection mechanisms and "lender of last resort" system of securities companies, strengthening supervision of off-balance sheet business, accelerating the construction of financial markets, reform of fair value accounting credit rating to improve the risk management of securities companies and securities markets risk control systems and promote the sound development of the securities industry. In addition, we should also to strengthen the securities industry self-regulation, improve the cooperation mechanism of the securities company, establish a clear penalty mechanism and strengthen the disclosure of regulatory information, in order to lower transaction costs in the process of macro-prudential supervision.Overall, the research of implementation of macro-prudential tools and mechanisms is still in the exploration and improvement stage. Based on the background of global financial regulatory reform in the times of pre-financial crisis period and drawing on the macro-prudential supervision measures in "Basel III", this paper try to provide policy recommendations for building the basic framework of macro-prudential supervision of the securities industry in China and improving the regulatory system of securities companies.