Risk Analysis And Supervision Of Large Negotiable Certificates Of Deposit On Commercial Banks In China

Large Negotiable Certificates of Deposit originated in the United States in the 1960 s and was an emerging financial market instrument.Our country carried on the business pilot in the 1980 s.However,due to the immaturity of the market and policy guidance,the business development is temporarily suspended.In 2013,restarting with the mature market conditions and the strong willingness of financial institutions,Large Negotiable Certificates of Deposit has become an important promoter of marketization of interest rates in our country.With the advantages of flexible issuance mechanism,active liabilities of banks,open and transparent interest rate periods,active secondary market transactions and accounting of separate accounts,the business scale has been rapidly increasing within a few years after restart.The issuing agency has been expanded from the largest state-owned bank Gradually shift to joint-stock commercial banks and medium-sized city commercial banks,fund products become the main investor and the turnover rate increased from 235.2% in 2016 to 429.25% in 2017,which is developing rapidly.Based on the analysis of market factors,reference to relevant literature and comparison of foreign development history,the article puts forward the inherent driving force of its rapid development: First,regulatory guidance is loose;Second,commercial banks have found obvious arbitrage space;Third,commercial banks have made reasonable choices to deal with the monetary policy in future.Then,using the three cases of bank A issuing Large Negotiable Certificates of Deposit to arbitrage as the research foundation,this paper explains the basic patterns used by commercial banks to arbitrage,namely multi-layer nested arbitrage,maturity mismatched arbitrage,outsource arbitrage and regulatory arbitrage.First,the more funds are embedded in the chain,the higher the capital cost of investing in the real economy at the end of the chain,and the greater the probability of systemic risk accidents will occur in the entire financial system.When the asset price falls sharply,the market agencies are likely to panic redemption,which in turn lead to systemic financial risks.Second,commercial banks issue Large Negotiable Certificates of Deposit,using raise funds to invest inter-bank wealth management,and outsource products,non-standard bonds and bonds.The duration of the asset is longer than the liability,and the maturity mismatch easily leads to the liquidity risk.Third,when banks issue Large Negotiable Certificates of Deposit,raised funds to buy bonds of non-bank financial institutions,and non-bank financial institutions will then purchase wealth management products issued by banks.This will result in the transfer of mutual benefits and the capitalization of arbitrage funds in financial institutions.Fourth,due to using the emerging business regulatory policies to carry out business activities,commercial banks achieve the purpose of avoiding regulation,reducing operation costs and obtaining excess returns.As a result,the funds spin in the financial system without investing in entities,and liquidity risks accumulated,which is not conducive to the steady development of financial markets in our country and social stability.So regulators issued a series of policies for inter-bank business in order to control business scale,balance the duration of assets and liabilities,and prompt funds to real economy.By increasing the MPA assessment indicators,making the New Rules of the IMF and other measures to further control the development of inter-bank Large Negotiable Certificates of Deposit and reducing the main investors,regulators achieve the goal of controlling the business scale and arbitrage.Based on the above analysis,this paper puts forward some suggestions on controlling the risk of Large Negotiable Certificates of Deposit: to control the double-speed growth of Large Negotiable Certificates of Deposit and to build a systematic financial risk control mechanism.At the same time,it proposes that the development of inter-bank Large Negotiable Certificates of Deposit should balance the relationship between profit creation and business development,between assets and liabilities and intermediary business development,and between business innovation and financial normative.The author puts forward several typical arbitrage models and analyzes the risk of Large Negotiable Certificates of Deposit by case in this paper.If systematic considerations are taken,the risk accumulation effect will be more pronounced.From The development of Large Negotiable Certificates of Deposit in China has just beginning,and the path of development in the future will be quite long.Th e development should proceed steadily on the basis of reasonable and compliance.Blindly expanding the risk and accumulating the probability of systematic risk in pursuit of short-term profits will not only be refused by regulators,but also is harmful to the healthy and steady development of commercial banks.we must strictly follow the regulatory policy and develop the business rationally to ensure the stable development of China's financial market.