http://www.gov.cn/gzdt/2009-03/26/content_1269618.htm

http://www.bis.org/review/r090421b.pdf

http://www.pbc.gov.cn/english/detail.asp?col=6500&id=182

周小川:关于改变宏观微观顺周期性的进一步探讨

中央政府门户网站 www.gov.cn   2009年03月26日   来源:人民银行网站

关于改变宏观和微观顺周期性的进一步探讨

周小川

人们就当前金融危机的根本原因已经展开了很多讨论,包括在货币政策、金融监管、会计准则等方面的经验教训等。本文旨在讨论金融体系中的一些顺周期性因素、可能采取的补救措施以及货币和财政当局在严重市场危机下如何发挥专业作用。本文还简要介绍中国金融业改革以及我国应对经济增长放缓而实施的宏观经济政策。本文中的部分观点曾于2008年11月15日巴西圣保罗G20财政部长和央行行长会议上阐述过。

一、金融体系的内在顺周期性特征

谈到系统稳定性,我们可以借助电子工程或控制论的部分概念。在复杂系统里,通常有多个反馈环,有些是正反馈,有些是负反馈。正(+)反馈环强化了放大作用 (类似于增效器),从而产生自激震荡(如同繁荣和萧条的顺周期性)和零点漂移 (如同泡沫的参照点);而负(-)反馈环削弱放大作用,从而有助于系统稳定和零点的自我校正。近年来在经济金融体系中,宏观和微观的层面上有太多的正反馈环,而负反馈环不多,因此系统呈现非常明显的顺周期性。我们现在并不需要完全重建整个系统,而是需要给系统添加几条负反馈环,这可以充分改变系统的特性。

金融危机往往起源于泡沫的积累及其破灭。经济学家通常着重阐述宏观层面的顺周期性,然而,在微观层面上,目前市场结构蕴涵了一些值得关注的顺周期性特征,在应对当前危机、改革金融体系时应予以解决。在现有的市场结构中,需要在微观层面安排更多的逆周期机制(即负反馈环),以确保金融体系更为稳健。

1.信用评级问题和来自外包的羊群现象

全球金融体系在投资决策和风险管理时高度依赖外部信用评级,从而产生了显著的顺周期性特征。信用评级业由少数几家大型机构主导,它们几乎提供了全部重要的评级服务。三大信用评级机构的具体评级相关性较高,它们叠加在一起产生了强大的周期性力量。经济繁荣促使乐观情绪产生,经济衰退则导致悲观。众多市场参与者使用三大评级机构的评级结果,并作为业务操作和内部考核的标尺,在机构层面产生大量的“羊群行为”。此外,由发行人付费的评级机构的经营模式使评级过程存在很多利益冲突(发行人还给评级机构支付产品结构设计方面的咨询费用,从而产生更多的问题)。与抵押贷款相关的结构性产品的评级模型也存在不少缺陷,在本轮由次贷问题引发的危机中,评级机构曾给予很多次贷类产品较高的评级,后来又在短期内大幅降低其评级导致金融机构大规模减计资产。

羊群现象还可以理解为正反馈环过多从而导致自激振荡。在投资决策时,我们强调要分散投资。投资组合分散化意味着在看涨某些投资品种时,也要防备另外一些资产价格下跌。投资者多元化则意味着市场既需要乐观者也需要悲观者。因此金融体系不应鼓励投资者千人一面或大家采用一模一样的投资组合。然而,太多的金融机构的内控系统及其投行人士和交易员在内部评价、风险控制中所使用的技术路线模型是外包的,包括前些年很多金融机构所使用的程序交易(program trading)模型也是外包的。如此普遍的系统技术的外包就造成了金融体系中千人一面的局面,产生了强烈的顺周期性。对于复杂的金融产品,大多数金融机构均使用了由少数金融工程师设计的模型,这些模型在金融业使用广泛。在一定条件下,上述模型在同一时间产生的方向性结果类似,也就是说模型结果高度相关。当全球金融业均使用上述模型时,资产价格繁荣和衰退的程度都被加剧。此外,由于市场参与者使用相同类型的模型,其行为也高度同步,从而产生了系统性风险。监管者应要求具有系统重要性的金融机构通过内部判断来补充外部定价模型。为强化结构性产品发行人做好风险评估的动力,监管机构应要求其在资产负债表中持有一定份额的标的资产,从而减缓“发起—配售”(originate-to-distribute)商业模式产生的贷款发放过程中的道德风险和欺诈性贷款发放等问题。

从评级的使用者方面看,道德风险问题长期存在。在全球范围内,很多规定都要求投资管理决定和风险管理做法要确保金融产品达到主要评级机构给出的一定水平的评级。这样做使得从业人员可以搭外部评级的顺风车,只要金融产品满足了门槛评级标准就无需担心其内在风险了。长此以往,金融业习惯了这种做法,非常依赖于外部评级并为此感到自满。有些市场参与者似乎已经忘了,评级不过是以历史经验为基础得出的违约概率的指标,它永远不能成为未来的保证。与感到自满一同滋生的还有投资经理产生惰性和马虎态度,不去质疑投资组合中投资产品的内在风险。一旦问题发生,就像此次危机一样,指责的矛头都指向了评级机构。使用评级结果的机构(资产管理公司、金融服务企业等)应该最终对其客户和股东负责,应对风险做出独立判断,而不是光把风险评估职能外包给评级机构。在必须使用外部评级时,还要进行内部独立判断并以此作为外部评级的补充。事实上,上述问题相当严重。监管者应鼓励金融机构提高内部评级能力,减小对外部评级的依赖。中央银行和监管机构需要出台新规定,要求金融机构外部评级的依赖度和使用率不超过业务量的50%,至少对有系统重要性的金融机构应该这样规定。同时,有系统重要性的机构还应加强内部评级能力,对信用风险做出独立判断。

2.公允价值会计准则、盯市原则和按模型定价

现有的国际会计准则(IFRS,由国际会计准则委员会制定)和公认会计准则(GAAP,由美国的金融会计标准委员会、会计师协会和美国证监会共同制定)都要求根据资产负债的不同特征和管理者的持有意图对不同类型的资产负债进行混合计量,即对交易目的资产和可出售资产按照公允价值计量,对持有到期的资产、贷款和没有公允价值的负债按照历史成本计量。

GAAP和IFRS相类似,都把公允价值定义为一种资产或负债能够与有意愿的交易对手以有序方式进行交易和清偿的价格。两种会计框架都提供了分层次的公允价值计量方法:层次1-在活跃市场有可观察的价格,因而采用市价对资产和负债进行价值计量,也称盯市原则;层次2-没有活跃市场时可采用模型来估值,但需要输入可观察的参数,称为按模型定价;层次3-类似盯住模型的方法,用不可观察的输入参数和模型假设进行。GAAP和IFRS都要求对公允价值方法的运用、特定假设、风险暴露、敏感性进行披露。

在此次危机中,公允价值暴露出的问题主要体现在:一是公允价值较之于历史成本加剧了市场的波动。公允价值较之于历史成本更加动态,更能反映资产和负债的实时价值,但另一方面也加剧了资产和负债的价值变化,并通过公允价值计价工具的损益变动加大了收益的波动性。在此次危机中,各金融机构因为持有大量抵押类证券,按照公允价值计量出现了大量未实现(unrealized)且未涉及现金流量的损失。这些损失仅具有会计意义,但这种天文数字的“账面损失”却扭曲了投资者的预期,形成了“价格下跌—资产减计—恐慌性抛售—价格进一步下跌”的恶性循环。二是缺乏在非活跃市场运用公允价值的指引加剧了市场的动荡。从公允价值的定义来看,有序交易是其运用的一个前提,但在危机中,大量机构被迫变现资产,形成的价格并不符合公允价值的前提,但会计准则中缺乏对此类情况的具体指引,使得会计主体不得不按照不合理的市场价格进行公允价值计量,进一步增加了“账面损失”额,加剧了“价格下跌—资产减计—恐慌性抛售—价格进一步下跌”的恶性循环。

可以说,在正常情况即低频波段时,盯市是个负反馈环。然而,在极端情况即高频波段时,盯市就追赶不上相位变化了。当相位滞后大于90度时,负反馈环就呈现正反馈环的特点。这时我们需要切断反馈环,因此就需要一个断路器。在情况恢复常态时再使系统重新恢复使用。在经济系统中,我们需要建立这样一种断路器机制,抑制特殊情况下盯市原则和公允价值会计准则带来的顺周期性。

3.巴塞尔新资本协议内部评级法

2004年发布的《巴塞尔新资本协议》(Basel II)中,对资本充足率的框架进行了完善,从单一的资金充足约束转向突出强调银行风险监管,将最低资本要求列为银行监管的三大支柱(监管资本要求、监管响应、信息披露和市场监督)之一。该协议延续了8%的最低资本要求,将风险加权资产由原来单纯反映信用风险改进为全面反映信用风险、市场风险和操作风险,同时对计量风险的方式加以升级和多样化。自发布以来,全球主要经济体都在制定实施新协议的步骤和时间表,其中欧洲主要国家已经基本上实施了资本新协议。我国也在为实施资本新协议做积极准备。

巴塞尔新资本协议框架允许金融机构使用内部评级法对复杂产品定价并评估其风险。资本充足率计算中的风险权重来自内部模型。在其他条件相同的情况下,当经济高速增长时,风险权重通常较低,资本充足率因而较高;而在经济衰退时,风险权重通常较高,资本充足率则较低。因此,金融机构倾向于在好年景时提高杠杆率,而在年景不好时则降低杠杆率,从而促进了繁荣期的泡沫积累,以及衰退期的信贷紧缩与资产抛售,导致周期性波动上升。这体现了较强的顺周期性。

金融稳定论坛成立了工作组,并与巴塞尔委员会合作研究强化巴塞尔新资本协议框架、解决本次危机中体现出来的该框架的弱点包括顺周期性的方法。

二、发挥好各国负责整体金融稳定的部门的专业作用,建立资本约束的逆周期机制

对金融机构尤其是银行业金融机构的监管中,资本充足率要求是最重要的约束机制之一,此次危机表明,良好的资本实力对于银行的抗风险能力以及更广泛的金融稳定至关重要。有效克服现有资本监管框架中顺周期因素以及增加银行资本的质量是防止严重金融危机的必要前提。危机反映了银行机构在资本充足性方面存在许多脆弱性,表现在:Basel II对复杂信贷产品的风险重视不够;最低资本及其质量要求未能在危机中提供足够的资本缓冲;资本缓冲的顺周期性加速了金融动荡;以及金融机构间在资本衡量标准方面存在差异。在国际上,目前正在致力于强化资本约束的普遍性,包括对资产证券化、表外风险敞口和交易账户活动提出资本要求,以及提高一级资本的质量和全球范围内最低资本要求的一致性。此外,作为资本充足率要求的补充,构建适当的杠杆比率指标可以在审慎监管中发挥作用,既可以作为潜在承担过度风险的指标,也可以起到抑制周期性波动被放大的作用。

在克服现有资本充足率框架的脆弱性尤其是资本缓冲的周期性方面,可以积极发挥各国负责整体金融稳定的部门的专业作用。当经济周期发生异常变化或经济系统需要非常规的逆周期调整或特殊稳定手段时,可以考虑让负责整体金融稳定的部门发布季度景气与稳定系数,金融机构和监管机构可以使用该系数,乘以常规风险权重后得到新的风险权重。因此根据这个风险权重得出的资本充足率要求和其它控制标准(如内部评级法)可以反映整体金融稳定的逆周期要求。

传统上来说,财政当局可以实施逆周期的财政政策,货币当局可以使用逆周期的货币政策工具,但这些工具都是宏观的。为解决微观层面的顺周期性,可开发使用逆周期乘数,抑制顺周期因素,如内部评级法算出的风险权重。如上所说,负责整体金融稳定的部门可能有必要开发一套景气指数,并从中导出逆周期乘数。目前市场上已经有不少与经济周期、投资者和消费者信心相挂钩的各类指数。景气指数可以建立在这些指数的基础上。在市场繁荣期,资产价格一路走高,乐观情绪占主导地位,景气指数维持高位。经济衰退期则正好相反。一旦有了景气指数,推导出来的逆周期乘数就可以运用到顺周期因素中,如上面提到的风险权重、用于评级的违约概率和金融交易中使用的各种抵押物的折扣率。在合适的形式下,景气指数和逆周期乘数还可以用于其他的顺周期因素。举例来说,可以在经济繁荣期时对内部评级法计算得出的风险权重使用大于1的逆周期乘数(如1.5。这只是一个例子,实际的乘数取决于具体的计算,以下同),在经济衰退期时使用小于1的乘数(如0.7),从而缓解顺周期问题。乘数的大小还需要考虑其他因素,如产品类型、行业种类和风险敞口的国家类别。通过逆周期乘数的运用,除有助于克服顺周期因素以外,并通过改善抵押品的管理和作用于信用评级的违约率,更好地管理复杂信用产品的风险,从而提高资本金的质量。  

为了稳定严峻危机下的市场,财政部门和中央银行必须迅速行动,采取非常规措施。即使采取了强有力的正确措施,但应对不及时或延误的行动滞后于事态的发展,将会降低措施的效果。在现代西方社会,赋予财政部和中央银行稳定市场的特殊授权往往需经历较长的政治过程,因而常常错过最佳行动时机。自金融危机爆发以来我们已经看到了这样的案例。今后,各国政府和立法机关也可能考虑事先授权财政部和中央银行在特定的、定义清晰的危机情形下采取非常规手段以控制系统性风险,从而使其迅速采取大胆行动,而无需经历冗长甚至艰难的批准过程。这种系统性的事先批准的职责将使财政部门和中央银行的专业技能在市场最需要时发挥最大作用。

三、中国的金融业改革和当前的宏观经济政策措施

2003年,基于对我国银行业系统性风险隐患的深刻认识,中国政府作出重大决策,决定对四大国有银行进行重组改制。当时普遍认识到,我国的银行业尤其是四大国有银行如果不进行认真的改革,将无法抵御大的经济下行周期的冲击。冲击尤其是外来冲击可能会触发对银行体系信心的危机,导致系统性风险的爆发。中国政府首先决定对中国银行和中国建设银行进行外汇注资。银行业改革起步迅速,抓住了较好的时机,并取得了成效。改革前,中国工商银行、中国建设银行和中国银行等主要银行的不良贷款率较高,资本金水平较低甚至为负,并且不对股东价值负责。通过注资和公开上市,这些银行在经历了过去几年的快速增长后,现在仍然保持充足的资本。通过剥离不良贷款并加强风险管理,上述银行的不良贷款率均保持在较低水平(低个位数)。在公司治理方面,董事会组成中由独立非执行董事和专职董事占大多数,他们可为银行的发展提供战略指导,并起到有效的制衡作用。银行还引入了海外战略投资者,帮助其改善风险管理、业务流程、产品创新、现金管理、信用卡业务等方面。更重要的是,通过重组、公开上市及提高透明度的措施,这些银行开始实施问责制,股东价值受到了尊重。

在证券业,有问题的证券公司被关闭,一些重要的证券公司得到了政府的注资,进行了重组。证券公司客户的交易保证金与主要银行建立了独立的托管安排,防止客户资产被挪用。银行业改革和证券业清理取得了成功,为金融部门抵御经济衰退尤其是本次金融危机打下了坚实的基础。例如,尽管过去一年中股市大幅下跌,但截至目前证券公司尚未出现任何重大问题。主要银行经营稳健,能够承受经济增长放缓的影响。工、建、中三家国有银行的市值位居全球金融业前三位。改革提升了我国金融业的实力,是我国应对全球金融危机的强有力保障。同时,我国金融体系还得益于循序渐进的对外开放策略,对国外市场的风险敞口有限,因此在很大程度上避免受到次贷危机的负面影响。虽然中国的银行业改革取得了令人瞩目的成就,但主要银行改革后并未经历完整的经济周期,在很多方面还需改进。经济增长放缓将是对银行稳健程度的一次实实在在的压力测试。

尽管金融业非常稳健,但中国经济仍然感受到了世界实体经济增长放缓的影响,特别是出口部门。去年四季度以来,针对国际金融危机愈演愈烈,对我国经济负面影响日益加重的情况,我国政府反应迅速,果断提出实行积极的财政政策和适度宽松的货币政策,并提出“出手要快、出拳要重、措施要准、工作要实”的工作要求,迅速研究出台了一系列政策措施。

一是提出进一步扩大内需、促进经济平稳较快增长的十项措施。计划两年增加约4万亿投资,重点投向“三农”、保障性安居工程、交通等基础设施、节能减排和社会事业等5个方面。二是启动十大产业振兴规划,加大对企业政策扶持力度。目前已先后出台轻工、汽车、钢铁、纺织、装备制造、船舶、石化、有色、电子信息及物流等十大产业振兴规划,通过振兴规划努力遏制和扭转工业增速下滑的状况。三是加大金融对经济发展的支持力度。去年9月以来,先后五次下调基准利率,四次下调存款准备金率,保持银行体系流动性充足,促进货币信贷稳定增长。此外,还出台了9方面金融措施加大对经济发展的支持力度。四是着力促进就业,改善民生,加大支农惠农力度,扩大居民消费需求。五是推进增值税转型、成品油税费和医药卫生体制等重点领域和关键环节改革。通过上述措施,中国可望削减对外部需求的过度依赖,并通过扩大内需保持经济平稳增长,成为世界经济的稳定力量。

总体来看,宏观调控政策已初见成效,一些先行指标有回暖迹象,经济增速过快下滑的局面基本得到遏制。事实表明,综合比较世界上主要国家应对金融危机的政策措施,我国政府在出台重大举措时决策及时、果断、有力,体现了独特优越性。

Changing Pro-cyclicality for Financial and Economic Stability
Zhou Xiaochuan

Much has been discussed on the root causes for the current financial crisis, including but not limited to lessons on monetary policy, financial sector regulations, accounting rules. This note aims to stimulate debate and discussions on some of the pro-cyclical features in the system, possible remedial measures, and how monetary and fiscal authorities can play their professional roles at times of severe market distress. It also touches upon China’s financial sector reform and macroeconomic policy to counter slowdown in economic growth. The major points here were presented at the G20 Meeting of Finance Ministers and Central Bank Governors in San Paulo, Brazil on November 15, 2008.

1. The built-in pro-cyclical features in financial architecture

When we discuss system stability, we can borrow some concepts from electronic engineering or control theory. In a complicated system, there are usually many feedback loops, some of them are positive, some of them are negative. A positive (plus) feedback loop enlarges amplification (like multiplier), tends to create oscillation (like boom and bust pro-cyclicality) and zero-point shifting (like a reference of bubble). While a negative (minus) feedback loop can reduce amplification, help for system stability and self-correction of zero-point. In economic and financial systems of recent years, we have too many positive feedback loops on macro and micro levels, and a small number of negative feedback loops. Thus the system shows a strong pro-cyclicality. What we need to do is not to totally rebuild the system, but to add a few negative feedback loops, which are able to sufficiently change the characteristics of our system.

Financial crises normally originate in the accumulation of bubbles and their subsequent bursts. Usually, economists pay a lot of attentions to pro-cyclicality on the macro level. However, on the micro level, there are quite a number of notable pro-cyclical features embedded in the market structure today, which should be addressed as we deal with the current crisis and reform the financial system. In the current market structure, more counter-cyclical mechanisms or negative feedback loops on micro-level should be put in place to sustain a more stable financial system.

1) Rating problems and herding phenomenon arising from outsourcing

The global financial system relies heavily on the external credit ratings for investment decisions and risk management, giving rise to a prominent feature of pro-cyclicality. The rating industry is dominated by a few large players, which provide practically all important rating services. Specific ratings from the big three tend to be highly correlated and they are combined to form a strong cyclical force. Economic upswings produce euphoria and downturns generate pessimism. Many market players adopting ratings from the three agencies and using them as the yardstick for operations and internal performance assessments clearly result in a massive “herd behavior” at the institutional level. Moreover, the rating process is filled with conflicts of interest by virtue of the issuer-paying business model (issuers also pay for the rating agencies’ advisory services on structuring their products, which leads to more problems). Moreover, the rating models for mortgage-related structured products are fundamentally flawed. During the current crisis stemming from the subprime mess, the high ratings assigned to many subprime products and the massive downgrades of them within short period were unprecedented, which drove the massive write-downs by financial institutions, and exacerbated downward spirals.

Herding phenomenon can also be explained as too many positive feedback loops to cause an oscillation. In investment area, we always preach on the virtue of diversification. Portfolio diversification means when you bet for upside in some products, you should also place protection elsewhere for downside. Investor diversity and heterogeneity is predicated on the notion that market needs both optimists and pessimists. Thus the system should not encourage all investors and their portfolios to behave in the same way. However, too many financial institutions outsourced the development of their internal control systems and the technical models used by their bankers and traders in internal assessment and risk control, including the program trading models that had been widely adopted at an earlier time. Outsourcing of system technologies at such a prevalent scale contributed to high degree of homogeneity in the financial system, which strongly added to pro-cyclicality. For complex financial products, most institutions use models built by a handful of quantitative analysts that get widely adopted throughout the industry. Such models tend to produce similar directional results at the same time when certain conditions prevail. In other words, outcomes from such models are highly correlated. When they are used by the whole financial industry world-wide, asset price boom is made much stronger and bust much more damaging. And due to high synchronizations of market participants’ behaviors as a result of using the similar models, systemic risk arises. Regulators should require systemically important financial institutions to complement external pricing models with internally developed capabilities to exercise judgment. In addition, to give issuers of structured products more incentives to better assess their risks, regulators should ask them to retain a meaningful share of the underlying assets on their balance sheets in order to alleviate the myriad of problems associated with the “originate-to-distribute” business model, including moral hazards and fraudulent loan underwritings.

On the users’ side of ratings, there is the long-standing moral hazard issue. Various rules have required investment management decisions and risk management practices to be benchmarked on financial instruments attaining certain ratings from the so-called Nationally Recognized Statistical Rating Organizations (NRSRO). This practice has enabled industry practitioners to piggyback on the external ratings and not to worry about the inherent risks once the instruments have achieved the threshold ratings. Over time, the financial industry has become accustomed to the practice and become complacent of the ratings they rely on so heavily. Some market players seem to have forgotten that the ratings are no more than indicators of default probabilities based on past experiences but were never meant to be guarantees for the future. Along with complacency, there is inertia and sloppiness on the part of investment managers to ask tough questions about the inherent risks of instruments sitting in their portfolios. Once problems take place, as we have seen during the current crisis, fingers are pointed to the rating agencies. The institutional users (e.g., the money managers and financial institutions) of credit ratings should be ultimately accountable to their customers and shareholders and should exercise their own judgment of risk, not just outsource risk assessment duties to the rating agencies. To the extent they have to use external expertise, internal and independent judgment has to be deployed as a complement. As a matter of fact, the problem has become so serious that regulators need to encourage financial institutions to enhance internal rating capability to rely less on external ratings, and that central banks and regulators should impose requirement whereby use of external ratings should not exceed 50 percent of business activities, at least for systemically important financial institutions. Internal capabilities should be developed to exercise independent judgment on credit risks at such organizations.

2) Fair value accounting, mark-to-market and mark-to-model

Both IFRS and GAAP require mixed value measurements of different type of assets and liabilities according to their features and the management’s intentions of holding them, i.e. assets on the trading book and available-for-sale assets should be measured on the fair value basis, while hold-to-maturity assets, loans and liabilities without an objective fair value should be recorded at historical costs.

GAAP and IFRS define fair value in a similar way, which is a price at which an asset and liability can be traded with a willing counterparty in an orderly manner. Both accounting frameworks provide measurement approaches at differentiated levels. Level 1: prices can be observed on active market, which are used to measure the value of assets and liabilities, a practice called mark-to-market. Level 2: when there is no active market, prices are assessed by using models with observable parameters as inputs, a process called mark-to-model. Measurement approach used on level 3 is similar to the mark-to-model approach, but it involves unobservable parameters and model assumptions as inputs. Both IFRS and GAAP require disclosure of the adoption of fair value approaches and specific assumptions as well as risk exposures and sensitivities.

The problems of fair value accounting have been exposed by the current crisis. First, compared with the historical cost approach, fair value accounting intensifies market fluctuations. While the fair value approach is more dynamic and can better reflect the real time value of assets and liabilities, it also magnifies the changes in their values and increases the volatility of returns through the profit and loss account as a consequence. As a result of the massive collateralized securities they held, financial institutions registered mounting unrealized losses which actually involved no cash flow under the fair value rule. Though these losses were only meaningful in accounting, such astronomical book losses distorted investors’ expectations and formed a vicious cycle of prices tumbling – asset write-down �C panic selling �C further prices slumps. Second, the poorly guided adoption of fair value in non-active markets exacerbated market volatility. As defined, the using of fair value approaches must be based on the prerequisite of orderly trading. At times of crisis, as a large number of institutions were forced to liquidate their assets, prices developed under this situation did not meet the prerequisite for fair value measurement. However, due to the lack of specific guidelines on dealing with such circumstances, reporting entities had to conduct fair value measurement on the basis of unreasonable market prices, which magnified book losses and exacerbated the vicious cycle.

We could say, in a normal situation or in a low frequency band, mark-to-market is a negative feedback loop. However, in an extreme situation or high frequency band, mark-to-market mechanism can not catch the changing phase. When phase lag is larger than 90º, a negative feedback loop can become a positive feedback loop in characteristics. In this situation, what we need to do is to cut off this loop, thus we need a circuit breaker. We can resume the system when it returns to normal condition. In economic system, we need to put into place a sort of circuit-breaker mechanism to stem the pro-cyclicality caused by mark-to-market and fair value accounting in specific situations.

3) Internal rating based (IRB) approach under Basel II

The New Basel Capital Accord (Basel II) released in 2004 improved the capital adequacy ratio framework, shifting from singular requirement on capital adequacy to highlighting the importance of risk-based banking supervision, and including minimum capital as one of the three pillars of banking supervision (regulatory capital requirement, regulatory responses, disclosure and market discipline). Under Basel II, the minimum capital requirement of 8 percent was unchanged, but the notion of risk weighted asset was improved to reflect not only credit risks, but also market risks and operational risks. Following the release of the Basel II, major economies have outlined steps and the timetable for its implementations, and major European countries have basically implemented the new Accord. China is also making preparations for implementing it.

The Basel II framework allows financial institutions to apply internal rating-based approach in pricing and assessing risk of complex products. Risk weights for purpose of capital adequacy calculation are derived from internal modeling. Such weights are generally low and lead to high capital adequacy ratio (CAR) during economic upswing, and are high and lead to low CAR during cyclical downturn, everything else equal. As a result, financial institutions tend to have high leverage ratios during good times and have to deleverage during bad times. This amplifies bubble buildup during upswings and leads to credit squeeze and asset dumping during downturns, thus increase cyclical volatilities. This reflects a strong pro-cyclicality. We took notice that FSF has formed working groups to cooperate with BCBS in studying ways to strengthen Basel II framework, and to address its weaknesses revealed during the crisis including its pro-cyclicality.

2. Give full play to the professional role of authorities of overall financial stability and establish a counter-cyclical mechanism for capital requirement

Among the supervisory requirements on financial institutions, banking institutions in particular, capital adequacy ratio is one of the most important prudential requirements. The current financial crisis suggests that a sound capital buffer is critical for banks’ resilience to risks and financial stability in a broader sense. Effectively addressing the pro-cyclicality elements in the existing capital requirement framework is essential for avoiding a repetition of serious financial crisis. The ongoing crisis has exposed much vulnerability in capital adequacy framework of banks in the following areas: inadequate capture of risks by the Basel II framework for complex credit products; the minimum capital requirement and the quality of capital did not provide adequate buffer during the crisis; the pro-cyclicality of capital adequacy amplified economic oscillations; the differences in capital requirements among different types of financial institutions. Efforts are being made in some countries to widen the coverage of capital requirements, including setting requirements on asset-backed securities, off-balance sheet risk exposures and trading account activities, improving the quality of tier 1 capital, and enhancing the global consistency of minimum capital requirements. In addition, as a complement to capital adequacy ratio requirement, a notion is under discussion that a properly constructed leverage ratio indicator will play a role in the macro prudential regulation framework as the new indicator can both measure potential excessive risk-taking and dampen the amplification of cyclical fluctuations.

In addressing the vulnerability of the existing capital adequacy ratio framework, particularly the pro-cyclicality of capital buffer, national authorities responsible for overall financial stability can actively play their professional role. If economic cycle comes into an unusual phase, or economic system needs an unusual counter-cyclical adjustment or special stabilization measure, it can be considered to let authorities of overall financial stability issue quarterly indicators of prosperity and stability, which can then be used by financial institutions and regulatory supervisors by multiplying into risk weights for capital adequacy ratio calculation. Thus the risk weighted capital adequacy requirement and other control criteria (like internal rating-based approach), can reflect counter-cyclicality preference of the stability authorities.

Traditionally, finance ministries have counter-cyclical fiscal policies and monetary authorities have counter-cyclical monetary policy tools at their disposal, but these tools are macro in nature. As a remedy to pro-cyclicality at micro level, counter-cyclical multipliers can be developed and used to dampen the pro-cyclical factors such as the risk weights that come out of the internal rating-based exercises. To begin with, as mentioned above, it may become necessary for financial stability authorities to develop a set of prosperity indices from which counter-cyclical multipliers can be derived. There already exist a multitude of private sector indices linked to business cycles, investor and consumer sentiments. Prosperity indices can be built on the basis of these indices. During market boom, everything points to the up-tick, market exuberance prevails, and prosperity indices are high. As a contrast, during economic downturn, the opposite holds. Once prosperity indices are available, the derived counter-cyclical multipliers can be applied to the pro-cyclical factors such as risk-weights mentioned above, default probabilities for credit rating purposes and discount (i.e., haircuts) percentages for various collaterals used in financial transactions. In suitable forms, they can be applied to other pro-cyclical factors too. One example of using them is to apply a multiplier greater than 1 (say, 1.5. Please note this is only an example and the actual multiplier is determined by specific calculations. The same applies below) during economic upswing and another multiplier less than 1 (e.g., 0.7) during downturn to the IRB-based risk weights to alleviate the pro-cyclical problems. The magnitude of the multiplier can be refined by taking into consideration other factors such as product type, industry and country of risk exposures. Through the applications of the counter-cyclical multipliers, we can not only mitigate the pro-cyclicality elements in capital requirements but also improve quality of capital by improving management of collaterals�� and by using multipliers-adjusted default probabilities and better managing the risk in complex credit products.

To stabilize markets under severe stress, finance ministries and central banks need to act fast and apply extraordinary measures. Untimely or delayed response falls behind the curve and would make the outcome less than desired even if the response is correct and strong. In modern Western societies, a prolonged political process for mandates to finance ministries or central banks often miss the best timing for action. We have observed such cases during the current crisis. Going forward, national governments and legislatures may consider giving pre-authorized mandates to ministries of finance and central banks to use extraordinary means to contain systemic risk under well-defined stress scenarios, in order to allow them to act boldly and expeditiously without having to go through a lengthy or even painful approval process. Such systematic pre-authorized mandates would put the specialized expertise of finance ministries and central banks to the best use when markets need it the most.

3. China’s financial sector reform and ongoing macroeconomic stimulus measures

In 2003, fully aware of the systemic vulnerabilities of China’s banking industry, the Chinese government made a courageous and strategic decision to restructure the four state-owned commercial banks. It was commonly recognized at that time that Chinese banks, especially the big four, could hardly withstand a big economic downturn if not seriously reformed. The banking system was then vulnerable to shocks, especially external shocks, which would trigger confidence crisis or even systemic meltdown. The Chinese government decided to first inject capitals into Bank of China and China Construction Bank by tapping into the official foreign reserve. The banking reform got a quick start and captured a good time window. Before the reform, Industrial and Commercial Bank of China (ICBC), CCB and BOC were plagued by high NPL ratios, low or negative capital base and a culture not accountable to shareholder value.. Through capital injections and subsequent public listings, these major banks now enjoy strong capital base even after fast growth during the last five years. Through NPL carve-out and strengthening of risk management practices, all of these banks have maintained NPL ratios of low single digits. In terms of corporate governance, boards are comprised of independent non-executive directors and full-time and dedicated directors who can provide strategic guidance for future development and effective checks and balances. Strategic investors from overseas were brought in to help them improve in areas of weakness such as risk management, business processes, product innovations, cash management, and credit cards and so on. More importantly, through the restructuring processes and public listings and the transparency that followed, accountability culture started to sink in and shareholder value became respected, not ignored as before.

In the securities industry, the shaky firms were closed down and some important ones received government capital injection and were restructured. Their customers’ cash accounts were put into independent custodian arrangements with the major banks, thus removing the possibility of customer asset commingling and misappropriations. The banking reform and the securities industry cleanup have proved to be successful and have laid a solid foundation for the financial sector to withstand economic downturn, in particular the ongoing global financial crisis. For example, despite the steep drop of the stock market since late 2007, no securities firms have gotten into big trouble so far. And the major banks are in a strong position to weather economic slowdown. ICBC, CCB and BOC top the global list of banks’ market capitalizations. A more robust financial industry after the reform places China in a better position to withstand the financial crisis. Meanwhile, it should be noted that China’s financial system has been helped by the progressive opening-up strategy and its limited exposure to overseas markets. We should bear in mind that despite the notable achievements in banking reform, the major banks have not gone through a full business cycle and still have much to improve. An economic slowdown will be the ultimate stress test for the robustness of the banks’ strengths.

Irrespective of China’s sound financial sector, the Chinese economy, especially the export sector, has felt the impact brought by the slowdown of the global economy. Since the fourth quarter of 2008, as international economic crisis worsened and exerted greater impacts on China’s economy, the Chinese government made rapid responses by decisively adopting a proactive fiscal policy and an adaptively easing monetary policy, and launching a bundle of timely, targeted and temporary policies and measures.

First, ten measures were launched to stimulate domestic demand and promote stable and relatively rapid economic growth. The central government planned to invest an extra 4 trillion RMB over two years, which would mainly go to the agricultural sector, welfare and affordable housing, transportation infrastructure, and energy conservation and emission reduction. Second, ten measures to revitalize the industrial sectors were initiated, aiming to strengthen policy support for enterprises. At present, the revitalization plans cover 10 industries including the light industry, automobiles, steel, textile, equipment manufacturing, shipping, petrochemicals, non-ferrous metals, IT and logistics, with the aim to curb and reverse the trend of declining growth in these industries. Third, bolster financial support for economic developments. Since September 2008, People’s Bank of China has lowered the benchmark interest rates five times and reduced the reserve requirement ratios on four occasions, for the purpose of maintaining adequate liquidity for the banking sector and promoting stable growth of monetary and credit supply. In addition, 9 measures to strengthen financial support for economic growth were launched. Fourth, earnest efforts have been made to promote employment, improve people’s livelihood, better support and benefits for farmers, and stimulate household consumption demand. Fifth, policy measures were adopted to advance the reform of important areas including VAT tax transformation, reform of taxes and fees imposed on oil products, and medical and healthcare system reforms. Having taken the above-mentioned measures, China expect to maintain stable economic growth by boosting domestic demand and reducing dependence on external demand, thus serving as a stabilizing force in global economy.

In overall, the macroeconomic measures have produced preliminary result and some leading indicators are pointing to recovery of economic growth, indicating that rapid decline in growth has been curbed. Facts speak volume and demonstrate that compared with other major economies, the Chinese government has taken prompt, decisive and effective policy measures, demonstrating its superior system advantage when it comes to making vital policy decisions.

Submit Date:2009-3-26 17:10:00

Advertisements