(http://zqrb.ccstock.cn/html/2016-08/16/content_200858.htm)
Recently, China Banking Association released Report of China Asset Custody Industry. It revealed that, by the end of 2015, the number of custody banks in China had reached 27, up by 9 over 2011, and that apart from five major state-owned commercial banks and stock-holding commercial banks, an increasing number of medium-sized and small commercial banks were also part of them.
In terms of scale, the scale of asset custody stock of China’s banking industry had exceeded RMB 87 trillion, up by 62% on a YOY basis over 54 trillion in 2014 and over twenty times over RMB 4.1 trillion in 2009 when the custody committee was just founded. Along with the explosive growth of the overall industry, changes have taken place in the rankings of custody banks. In addition to that ICBC still ranked first, shareholding banks and other four state-owned banks were nearly in a dead heat. According to statistics of China Banking Association, in 2015, IB’s custody scale was RMB 7.2 trillion, exceeding four state-owned commercial banks and ranking second on the list. China Everbright Bank and China Minsheng Bank were also striving to be one of the best concerning custody scale.
Annual bank custodian fee was RMB 44.8 billion
Statistics of China Banking Association reveals that from 2012 to 2014, the custody scale in China’s banking industry maintained an average annual growth of 50% or so and its growth picked up speed. In 2015, the growth rate of custody scale in China’s banking industry stood 62.64%, up by 8 percentage points over 54.71% in 2014.
In view of overall custody scale, the main type was bank wealth management custody, occupying 24.57% of the total, followed by client asset management and custody of securities companies, client asset management and custody of fund companies and trust property safekeeping, accounting for 13.76%, 13.07% and 12.02% respectively. With regard to growth rate of scale, client asset management and custody of fund companies saw the largest growth rate of 154.21%. The growth rate of QDII asset custody was 114.84%. While custody of securities investment funds and bank wealth management custody seemed pale in comparison, with a growth rate of less than 90%.
A personnel in China Banking Association said that regulatory authorities issued many documents to guide the custody industry last year, for instance, Investment Management Method of Endowment Insurance Fund and Guide to Calculate Custody Account of Trusted Asset of Enterprise Annuity Fund in August, providing specific requirements and standard for capital custody. So far endowment insurance fund that can be included into investment have reached over RMB 2 trillion, a promising field for custody institutions. Banks can benefit from the increase in custody revenue as well. Data showed that custodian fee of securities investment funds covering the largest proportion stood RMB 9.028 billion, 20% of the total. The second largest was custodian fee of trust property with an amount of RMB 8.9 billion, representing nearly 20% of the total. And the third largest was client asset management and custodian fee of securities companies with an amount of RMB 6.525 billion.
Of particular note, although bank wealth management custody occupied the largest proportion of the overall custody scale, the revenue it produced only accounted for 10% of the total revenue, far less than custodian fee of securities investment funds. A personnel from department of asset management of a shareholding bank told the journalist that, at present, custodian fee rate of bank wealth management was 0.05%, a lower level. Generally fund custodian fee is charged according to a certain proportion of net fund asset on the valuation date, calculated on a daily basis and totaled till the end of the month, and paid on a monthly basis. The international custodian fee rate is 0.2% or so, while China’s custodian fee rate stands 0.25%, far higher than that of bank wealth management capital.
A new rankings in custody scale
According to statistics of China Banking Association, in terms of bank custody scale, ICBC still ranked first and IB struggled to be second in 2015, followed by Agricultural Bank of China, China Construction Bank, Bank of China and Bank of Communications with nearly the same custody scale. China Minsheng Bank and China Everbright Bank were in the forefront of shareholding banks, a slight gap with four major banks.
Data of ICBC showed that by the end of 2015, its total scale of custody asset had reached RMB 11.5 trillion, up by RMB 5.7 trillion and an increase of nearly 100% over 2014, the largest growth rate among state-owned banks. It custody scale occupied 15% in the market. The scale of securities investment funds custody exceeded RMB 1.9 trillion, scale of insurance asset custody exceeded RMB 2.7 trillion and scale of special fund accounts custody exceeded RMB 1.2 trillion. Compared with ICBC's exponential growth, scale of custody asset of other four state-owned banks was about RMB 7 trillion. Scale of custody asset of Agricultural Bank was RMB 7.14 trillion, up by RMB 2.18 trillion and an increase of 43.9% over 2014. Asset scale of China Construction Bank was RMB 7.17 trillion, up by RMB 2.88 trillion and an increase of nearly 70% over 2014. To our surprise, IB’s explosive growth had exceeded four state-owned banks. As of 2015, IB’s scale of custody asset had reached RMB 7.2 trillion, an increase of 52.6%; the number of online custody products was 18799, ranking first in the industry; the revenue of intermediate business of custody asset was RMB 4.319 billion, ranking second in the industry. According to Shenwan Hongyuan Securities Report, the number of IB’s clients in custody business exceeded 800 and IB was among banks in China with the largest number of signing institutions concerning custody business.
With regard to detailed custody classification, IB’s growth in scale of online custody public offering fund, scale of public offering fund custody and scale of special fund accounts custody exceeded 100%, and growth in scale of bank wealth management custody business exceeded 90%. IB owed its achievements to innovation and said that in 2015, IB assisted clients in developing multiple business innovations including officially put LOF Fund split and merger into operation, NEEQ, Shanghai-Hong Kong Stock Connect program and participating in physical delivery of treasury bond futures. When it comes to other stock-holding commercial banks, China Everbright Bank and China Minsheng Bank continued to strive to be one of the best with scale of custody of RMB 3.3 trillion and RMB 4.7 trillion respectively. However, the time-honored asset management bank’s growth in scale of custody in 2015 was only 19%. China Everbright Bank said that the bank give priority to risk control. In the context of steep ups and downs in stock market in 2015, custody business of the bank also witnessed an explosive growth in the first half of the year and a cliff-like drop in the second half of the year in terms of the number of combinations. The number of custody combinations of securities products reached a peak of nearly 15 thousand, while the slump of the stock market resulted in enormous risk warnings. The bank fulfilled custody responsibilities including accounts management and investment supervision through strengthening management, and avoided major risks. According to the journalist's incomplete statistics, the average growth in scale of custody in stock-holding commercial banks exceeded 60%, and the growth in revenue also far outnumbered that of other businesses.
No substantial progress was made in mutual fund deposit of five major banks
It is specified in the Guidelines on Promoting the Sound Development of Internet Finance that Internet financial institutions including P2P should select banks to build third-party depository system for funds of clients and that P2P institutions should complete in banks within 18 months.
Nevertheless, for banks, especially five major banks, Internet finance funds depository with P2P was apparently still not on the agenda. At present, only Agricultural Bank of China signed a letter of intent for cooperation with a platform in September, 2015 but no substantial progress was made. News was not heard about other four banks and P2P. In addition, five major banks have inventoried its businesses for many times. News provided by Hubei Banking Regulatory Bureau said that Bank of Communications adopted a list system, paid door to door visits to similar financial enterprises including P2P and wealth management, and checked their business scope and account funds transfer. Meanwhile, it investigated whether employees had fund transfer with similar financial enterprises and prevented employees from marketing, introducing and promoting products of similar financial enterprises via bank outlets, especially obtaining a commission by selling products not belonging to the bank. ICBC made it clear that it will strengthen risk control in key fields including P2P lending and private fund, halt custody cooperation with P2P, micro-credit companies and guarantee companies and prevent risk penetration of similar products in local exchanges. Sort out all rules and regulations for custody businesses, enhance management in key steps including product access, business approval and subsequent supervision, and strengthen all-around risk management, so as to make sure zero risk and zero error in business development.
Unlike five major banks, shareholding banks were more active in Internet finance funds depository. For instance, Ping An Bank said it will seize online opportunities and press ahead with the development of emerging custody businesses with strategic significance. Evergrowing Bank also argued that it will provide comprehensive funds depository service for P2P platform, and put in place strict risk control. It has developed supervision system for trading fund, third party depository system for excess reserve as well as P2P fund depository system. And it is promoting the development of Internet funds depository business. China Everbright Bank said prudently that it will strengthen business innovations and it is conducting research on Internet finance to explore commercial banks’ Internet finance custody business model, while it didn’t mention prospect of cooperation with P2P. A personnel from department of asset management of China Everbright Bank said the bank is sensitive about P2P fund depository and more consideration is given to risk to bank’s reputation. For major banks, fund custody of Internet finance has a smaller scale compared with that of fund and bank wealth management, thus not worth to run. It is more suitable for medium-sized and small banks.