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On-Floor Stock-Pledged Financing: Accumulation of Risks and Ways of Resolution (No.261, 2020)


By Yu Tao, Enterprise Research Institute, DRC

Research Report, No.261, 2020 (Total 6005) 2020-11-3

Abstract: In recent years, on-floor stock-pledged financing has seen gradual accumulation and resolution of risks. The rapid development of stock-pledged financing can be attributed to the support of regulation policies, the pursuit of profits by financial institutions and strong demands of enterprises for financing. In the course of the rapid development of stock-pledged financing, the volume of risks has become accumulated due to the slowdown of economic performance at the macroeconomic level, the decline in operating revenue of enterprises, prominent defects in enterprise governance and the loose control of security companies on risks. In 2018, the risks of stock-pledged financing reared their ugly heads due to rapid decline of stock prices, strong supervision and the slump of profits of companies with heavy stock-pledged financing. With the rebounding of stock market, coupled with strong support of regulatory authorities, relief funds established by local governments and market-oriented entry of financial institutions, the risks of stock-pledged financing have been partially resolved. To promote stable development of the business of stock-pledged financing, we need to take relevant measures to give further play to the role of relief funds, improve the risk control system and optimize institutional arrangements of the business.

Keywords: stock-pledged financing, on-floor, security companies, risks