Research On Risk Management Of Stock Collateral Repo In Securities Companies

Stock Pledged Repo Transactions (hereinafter referred to as stock-pledged repo) is an innovative securities brokerage business in China’s securities market in recent years, which means that financiers get funding from investors by the holding shares or other pledged securities, and agree to return the funds or release pledged securities in the future. Because of its similar characteristics to bank credit lending business, and the function of economic leverage, and lower financing costs, convenient procedures, the business has attracted high attention and active participation by securities market once launched. This business has played an important role in securities market stimulation, activating of clients’stock asset, development of the real economy and income increasing of securities companies. However, improper risk management over this business will lead to a great risk, and also will be a direct negative impact on the securities companies, securities market and the real economy.Today Chinese securities companies commonly remain inept at risk management and market management mechanism also need to be improved, which is the biggest worries of the healthy development of this business. When the securities market risk comes, it will be difficult to resist the impact of risk. Given the lessons learned from the 2008 US subprime crisis caused by the financial crisis, and domestic and international capital markets, it is of great and practical importance for the securities company as the main capital provider, conduct in-deep study on risk management of the stock pledge repurchase, as how to avoid and control risks under the current market environment,In this paper, the writer uses the risk management of the securities company stock repurchase collateral as an entry point, through in-depth study of the business risk, and applies modern enterprise management concepts, methods of risk management, system management and other modern management, analyzes the common problems of carrying out stock pledge repurchase business in the securities firms in the process of daily risk management. In order to improve risk identification and control capabilities to ensure the healthy development of the stock repurchase collateral, according to the system management theory, the paper has constructed a comprehensive system for the risk prevention and control, which has laid a good foundation for the health and stable development of securities companies in this business in long run.This paper follows the main path as below:firstly, conduct a systematic study and research of risk management, risk management and other modern financial theory, with the main theoretical basis of the International Organization of Securities Commissions (hereinafter referred to as IOSCO) and the National Theory Tread way on securities companies risk management theory promoters Commission (COSO) established by the Commission under the overall risk management (hereinafter referred to as ERM theory);Secondly, followed by in-depth investigation, research and data statistics on the industry gathering within the access to large amounts of company stock pledged securities repurchase risk management information; Thirdly, using modern risk management theory, systems management theory to the current situation of China’s securities company’s stock repurchase collateral risk management were analyzed to identify the current Chinese securities company stock repurchase collateral risk management issues; Finally combined with the core of modern risk management theory, i.e. internal control, point integration framework and basic systems management theory. Above all, combining the China’s securities companies risk management practice, the writer has put forward a comprehensive risk management system for China’s securities firms to conduct the pledge of shares repurchase business.Conclusion in this paper, to be demonstrated by way of using H securities company as example and the research object, followed the systematically anatomical analysis on the credit risk, liquidity risk, operational risk, the risk of conflicts of interest and other risk problems carried out by the stock pledge repurchase. The paper uses the theory of IOSCO and comprehensive risk management and system management, aiming at strengthening the full risk management of securities companies, by carrying out the systematical analysis from the internal environment, risk assessment, control activities, information and communication, and monitoring other aspects, so as to establish the the framework and institutional system of risk management for securities companies in carrying out the pledge of shares repurchase business.