Research On Investment-loan Linkage Of China’s Commercial Banks

With the surging wave of “public entrepreneurship and whole-society innovation” and the gradual establishment of multi-level capital market, the pace of integrated management of domestic commercial banks continues to be accelerated, and the necessity and importance of banks involving in the business of “linking investment and loan” and “combining share and debt” continue to be highlighted. Represented by loans, financing debt is the main traditional business of domestic commercial banks; “investment and loan linkage” is a kind of equity financing business based on a certain additional condition of bank’s debt financing. In March 8, 2016, the CBRC Vice Chairman Zhou Mubing said that the investment loan linkage went smoothly; the first pilot will soon be announced and commercial banks that meet the conditions will be chosen to be a pilot.In the background of implementation of the innovation-driven development strategy, investment loan linkage, as the new cross-market, cross-organization and cross-product innovation service model of commercial banks, has brought many new topics for commercial banks from system mechanism, risk management, professional talents and other aspects, and a new way of thinking needs to be established for study. Integrate various social resources to form investment loan linkage force, promoting the investment loan linkage to become the beneficial attempt to improve commercial banks’ financial services and to support innovation and entrepreneurship. At present, the investment loan linkage of China’s banking business has shown a trend of comprehensive operation and professional operation preliminarily. On the one hand, the linkage between banks and investment institutions has been presented from a simple linkage developed to integrated services for providing funds, trust, financial advisers and customer referral for investment institutions. On the other hand, banks are trying to be involved in equity investment business with multiple channels.In this paper, investment loan linkage business is discussed from the aspect of China’s commercial banks. After the introduction of relevant theoretical basis and current development situation, this paper especially carries out four main modes of linked investment and credit business of China’s commercial banks, analyzing the four modes of operation and its advantages and disadvantages in details, finding out the basic questions of the present situation and the existence. Then, this paper analyzes the causes of the problem and puts forward concrete suggestions and general ideas for investment loan linkage business.This paper argues that the investment loan linkage business at present in China’s commercial banks have the following four main modes:(1) the model of cooperation between commercial banks and venture capital institutions. On the one hand, commercial banks, by virtue of their own extensive customer resources, select and recommend high-quality enterprises for the risk investment institutions, providing integrated services, including financial advisers and trusteeship, for the risk investment institutions. On the other hand, on the basis of evaluation and investment of risk investment institutions, commercial banks, cooperated with venture capital institutions, form the equity investment and bank credit linkage, investing the enterprises by the "equity & debt" model.(2) The internal investment loan linkage model of Commercial Bank Group. Commercial banks set up direct investment institutions abroad, and those subordinate investment institutions set up equity investment management companies at home, achieving the investment loan linkage by technological innovation of small and medium sized enterprises within the group.(3) Commercial banks set up equity investment companies. The model is similar to the group model, but it is a direct investment model; equity investment is more direct.(4) To issue loans to the risk investment institutions or to set up an industrial fund model. In such cooperation, banks, by using the deep cooperation between funds and institutional investors and forming interest groups combined with the local government, provide financial support for local small and medium sized science and technology innovation enterprise.This paper puts forward that, due to current regulatory requirements limit and dependence on the traditional profit mode of China’s commercial banks, there are many problems in investment and credit linkage development. First of all, the majority of enterprises involved in the equity investment are over-valued high risk enterprises, whose operating conditions are not stable; that’s on the contrary to the security requirements of the banking business model. Banks have congenital rejection to such operations. Secondly, the high risk of bank business does not match the low income of the investment loan linkage. It is hard for banks to develop a targeted profit model; in the form of investment advisers of participating in equity investment, banks can only earn a small amount of intermediate business costs, which makes it difficult for banks to achieve large-scale investment loan linkage business practice.This paper proposes that, through learning relevant foreign empirical mode, introducing new the business development process and optimizing investment and credit linkage business model, the development of investment loan linkage business of China’ commercial banks could be more effective. First, the government should strengthen supervision and train talents, promoting the vigorous development of power business investment loan linkage. Second, commercial banks should actively participate multi-level business profitable ways. Third, commercial banks should Targeted to solve the funding mismatches and Withdrawal problem. On the other hand, Effective risk prevention and control, breaking the rigid payment.Finally, commercial banks should establish an information sharing mechanism.