2014-08-07

Trust Companies Keeping Up Appearances

Trust companies have ¥10 billion in reserve funds. They are required to place 5% of after tax profit in reserves, but can stop once the fund reaches 20% of registered capital. The funds industry wide have grown solidly thanks to profitable years for the trust industry, but despite recent payment difficulties, no one has touched their reserve funds because to do so would be to admit a default.

近百亿信托赔偿准备金 至今仍在沉睡
Trust products continues to detonate payment event, did not evoke trust compensation reserve attention. Recently, Credit Trust "sincerity to open the 2nd Gold Trust Scheme" announced the extension, investors from many of the activists onto the road. Previously, the "sincerity to open on the 1st Gold Trust Plan" solution is a rigid payment.

Securities Times reporter noted, whether the product is a rigid payment on the 1st, or the 2nd product extension tactics are never mentioned Trust compensation reserve. And Shaanxi International Trust had to solve two problems at the trust products, are using their own funds to advance, nor the use of trusts compensation reserve.

Trust a total of nearly ten billion compensation reserve

According to "trust management approach", trust companies should extract 5% annual after-tax profit from them as trustee compensation reserve, but the cumulative total compensation reserve reaches 20% of the registered capital, can no longer extract.

As a precautionary trust business risk compensation reserve, date of birth lying asleep on the accounts. New China Trust Industry Association released data show that as of the end of 2013, provision for trust industry reached 9.06 billion yuan compensation reserve, growth of 24%.

According to relevant regulations, "compensation reserve should be kept in sound business, domestic commercial banks with a certain strength, or for the purchase of bonds and other low-risk, high liquidity securities species."

A large trust company executives said, "You could say the yield of these funds is very low, but because there are relevant provisions of the Trust generally can not just spend."

It has been observed in recent years, the entire trust industry significantly in improving compensation reserve. "One reason is that the trust's net profit increase, partly because a lot of trust to improve risk awareness, rainy day." Wang Kai Yuan Peng, director of the wealth of investment analysis said.

Experts governing China Trust Industry Association, said the author had previously Zhou Xiaoming, trust asset quality to date, the overall performance is quite good, can not happen systemic risk, the so-called systemic risk is clearly exaggerated. By the end of 2013, industry-wide compensation reserve provision of trust has reached 9.06 billion yuan, covering 45.30% issue 20 billion yuan of assets.

Why trust reluctant to spend

Although the past two years, many products have been exposed to honor the trust risk, but combing Securities Times reporter found that the information is not yet spent any trust over compensation reserve be honored.

According to "Financial Accounting System," provides that "engaged in the business of financial trust and investment companies should achieve this year as a percentage of net profit Trust compensation reserve, used to cover losses, and not for dividends, increase capital," and provides for specific purposes, "is engaged in trust business, so that the beneficiary or the company suffered losses, belong purpose trust breach of trust, breach of administrative duties, improper management of trust affairs loss of trust assets to the trust compensation reserve for compensation."

In other words, once the trust to use compensation reserve, it means recognizing their purpose breach of trust, breach of duty or management of trust management improper transactions. Since the responsibility for defining and easy, because of the need to consider other factors reputation, trust companies they use alternative methods to ease payment crisis.

"How to identify responsibility? First, look at the jurisprudence of the Court, the second is the trust's own admission. On the current situation, China has yet to determine the need for compensation trust because defaulting cases, trust is not likely to admit that they did not conscientious." a trust company executives concede that the central region.

The idea that compensation reserve ratio of trust provision is too low, these executives said, "can cover risk assets depends on how to use the current situation, even if increased to 10%, but also on things does not help. "

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