In order to strengthen the credit risk management on the corporate bonds in duration and effectively protect legitimate rights and interests of investors, the Shanghai Stock Exchange (SSE) has recently issued and implemented the “SSE Guidelines for Credit Risk Management on Corporate Bonds in Duration (for Trial Implementation)” (the Guidelines for short) on the basis of extensively soliciting and fully absorbing the opinions from market participants.
The Guidelines mainly involves the contents in four aspects: the first is to fully implement the responsibility of market participants for risk management and give full play to the central role of bond issuers and trustees; the second is to prevent and defuse prior and in-process credit risks, as all the parties concerned are required to take the initiative to carry out the credit risk management, continuously conduct monitoring, screening and early warning for credit risks and timely detect and defuse risks as early as possible; the third is to highlight the risk-oriented classification management by dividing bonds into the normal class, the attention class, the risk class and the default class and making differentiated arrangements for risk management on bonds in different risk classes; the fourth is to set up the reporting system for credit risk management of bonds by requiring trustees to submit periodical reports to the SSE every half a year and interim reports on high-risk bonds on an irregular basis so that regulators could master the risk situations in the market in a timely manner.
According to an SSE official, the SSE openly solicited opinions on the Guidelines on January 25, 2017. With the market participants attaching great importance, the SSE received feedbacks and opinions from bond issuers, trustees, investors and other parties concerned. The feedbacks and opinions generally recognize the positive role of the Guidelines in intensifying the credit risk management in the bond market and strengthening the protection of the legitimate rights and interests of investors, and the opinions on modification were put forward mainly in improving the monitoring over the bond risks, the standard for classification and other aspects. The SSE has earnestly studied the opinions one by one and made relevant revisions and improvements for the Guidelines, such as further improving the standard for risk classification, allowing trustees to conduct risk monitoring and classification on the basis of actual situations such as the business model and the industry characteristics of bond issuers, and more accurately defining the responsibilities taken by underwriters. In terms of the suggestions for the non-institutional and specific operations, the SSE plans to make responses and explanations in publicity, training and other ways after the issuance of the Guidelines.
As an important self-regulatory rule for the SSE bond market, after issuance and implementation the Guidelines will boost the implementation of the entity responsibility of market participants for the bond credit risk management, improve the market participants’ awareness of actively managing bond credit risks, set up the persistent and regular mechanism and system of bond credit risk management, move the focus on bond credit risk control forward, enhance the mechanism of defusing and disposing default risks based on the market and laws, step up the credit risk management of bonds in duration, and lay a solid foundation for building a high-level bond market.
After the issuance of the Guidelines, all market participants shall, firstly, attach great importance to and make effective efforts in the implementation of the Guidelines, earnestly organize the analysis of the rules in the Guidelines, accurately understand the requirements of the Guidelines and enhance the awareness and capability of bond credit risk management. Secondly, market participants shall systematically sort out the responsibilities of all parties concerned stipulated in the Guidelines, divide and designate the relevant tasks to specific departments and personnel, improve the internal system and process, adjust and rationalize the corresponding organizational structure and operational mechanism, fully make business and technical preparations for the implementation of the Guidelines, and be diligent and responsible in their duties. Thirdly, market participants should effectively carry out the bond credit risk management in strict accordance with the requirements of the Guidelines, and strengthen the efforts in monitoring and classification, screening and early warning as well as defusing and disposing for the credit risks in all bonds in duration especially the bonds matured in 2017, submit the first semi-annual report and related interim reports on bond credit risk management according to the requirements, and fulfill the relevant obligations for information disclosure and repayment of principal and interest.
To help market participants, especially bond issuers and trustees, better understand and implement the Guidelines, in the near future the SSE will hold forums for related persons in charge of the trustees, organize the training for the risk management business, step up publicity and organization, and guide all market participants in effectively implementing the relevant requirements of the Guidelines.
