The Effect Of The Net Capital Regulation System On The Financial Management In The Securities Companies

The net capital is an international-wide used indicator of the risk of the securities companies. In September, 2000, the net capital-oriented risk regulation system was introduced into China, and the promulgated'Calculating Rules on the Net Capital in the Securities companies'and'Principles on the Administration of Securities Companies'could act as the foundation of the system. Nevertheless, as the stock market prices in China went down to the lowest point for the four years since 2000, several securities companies were subjected to being taken over or shutting down due to the exposing risk. As the increase of the securities companies'risk and the requirement of the prudential regulation,'Principles on the Regulation on the Indicators of the Risk of the Securities Companies'and'Calculating Rules on the Net Capital of the Securities Companies'were promulgated on July 24, 2006 by the China Securities Regulatory Commission and were supposed to be implemented on November 1st, 2006, which meant that the risk management in the Chinese securities companies became specialized and internationalized. The principles limited the size of self-securities business and financing business explicitly, and set a high standard on the securities companies'abilities of dynamically measuring the risk. Furthermore, the stricter regulation measures were formulated based on the different net capital.The TB Securities Company is a new comer and established in 2003. Though it operates conservatively and has made profits in the successive 4 years after its commencement, it is lack of the core competence and the multiple profit-making models. Under the new system of the net capital regulation, how to reinforce the financial management and risk management, how to expand the businesses, and how to increase the efficiency of self-possessed capital and improve the profit-making ability based on the healthy and conservative operation turns out the urgent missions in the TB Securities Company.In the first chapter of this paper, the author introduces the calculating rules on the net capital, which is an international-wide used indicator of the risk. What is more, the situations and features of implementing the new system of net capital regulation after November 1st, 2006 are also discussed. In the second chapter, the author analyzes the influences of implementing the new system on the financial management and the business models, based on which the problems resulting from its implementation are indicated and the suggestions on improving the risk regulation system are proposed. In the third chapter, the influences of the net capital regulation system on the financial management in the securities companies in China are analyzed in the aspects of the financial management strategies, the financing and investing decisions, the financial risk management and the allocation of earnings. In the last chapter of this paper, based on the analysis of the situations that the TB Securities Company in and the net capital and the risk management index of the company, the specific influences of the net capital regulation system on the financial management in the TB Securities Company are discussed and the corresponding suggestions are proposed.To sum up, using the TB Securities Company as the research object and based on the introduction of the net capital regulation system and the across-countries comparisons, the influences of the net capital regulation system on the financial management in the securities companies in China are analyzed in aspects of the financial management strategies, the financing and investing decisions, the financial risk management and the allocation of earnings; furthermore, the countermeasures are proposed, which can enlighten the financial management in the TB Securities Companies and other companies.