Research On The Motivation And Effect Of Perpetual Debt Financing In Commercial Bank Industry

In recent years,deleveraging has become the focus of financial risk prevention.Financial deleveraging requires banks to turn a large number of off balance sheet businesses intobalance sheet.At the same time,the regulatory standards are more stringent,which require banks to maintain higher capital.As the last security defense line for banks to prevent risks,it's urgent to supplement capital.In February 2019,the executive meeting of the State Council proposed to support banks to use innovative capital tools to supplement capital,committed to enhancing the financial strength of banks in serving the real economy.As a result,perpetual bank debt emerged as a new way for banks to supplement capital.In June 2019,Minsheng Bank successfully issued40 billion non fixed term capital bonds,becoming the first joint-stock bank in China to issue perpetual bonds.This paper discusses the financing of CMBC's perpetual bonds in the form of case analysis,and analyzes the motivation,effect and related risks.The findings are as follows: firstly,the motivation of issuing sustainable bonds of China Minsheng Bank includes thehe external motivation of new regulatory regulations,trelevant national policy support,and the internal motivation of the capital adequacy ratio near the regulatory red line,the strategic positioning of its own "banks of private enterprises" and the need to resist risks;Secondly,Minsheng Bank's perpetual bonds are special in terms of loss absorption capacity and redemption mechanism.Through comparative analysis,it is found that the design of the coupon rate is relatively reasonable.Thirdly,from the perspective of cost,income and risk,it is found that compared with equity financing,the capital cost of CMBC's perpetual bonds is relatively low.However,compared with ordinary debt financing,it will bring higher capital cost and reduce the income of Minsheng Bank.Combined with the effect analysis,it is found that there are credit risk,performance decline risk,lag risk,information disclosure risk and other problems in Minsheng Bank's sustainable debt.In view of the above problems,this paper puts forward optimization suggestions: in the future,banks should consider multiple interests and carefully arrange issuance programs;use low-cost endogenous financing to establish a sustainable capital replenishment mechanism;at the same time,pay attention to the latest policy dynamic adjustment related processing and disclosure.Hope to promote the more sustainable and stabledevelopment of banks,and provide reference and suggestions for other banks to issue perpetual bonds.