Summary: Trusts are supervised by the State Financial Supervision and Administration and are a veritable regular army.
The State Financial Regulatory Administration was officially inaugurated on May 18, marking an important step in the reform of mainland financial regulators. According to the reform plan, the State Financial Regulatory Administration was established on the basis of the China Banking and Insurance Regulatory Commission to be responsible for the supervision of the financial industry other than the securities industry. The China Banking and Insurance Regulatory Commission will no longer be retained. On April 8, 2018, the China Banking and Insurance Regulatory Commission (CBIRC) was officially put into operation, and it has been more than 5 years since then.
The trust industry, previously supervised by the CBIRC, is currently regulated by the State Financial Regulatory Administration.
News on May 19, the State Council appointed and dismissed state workers and appointed Li Yunze as director of the State Financial Supervision and Administration Bureau; Cao Yu, Zhou Liang, Xiao Yuanqi and Jungle (female) were appointed deputy directors of the State Financial Regulatory Administration. Insiders in the trust circle learned that the four deputy directors were all former vice chairmen of the China Banking and Insurance Regulatory Commission and members of the Party Committee.
Therefore, trusts are veritable regular armies, not only safe and reliable, but also highly profitable.
The trust is safe and secure
The regulatory framework of the trust industry with "one body and three wings"
The most important reason why trusts are safe is that trust companies are formally licensed financial institutions with a regulatory framework of "one body and three wings".
All-in-one: State Financial Regulatory Administration
Three wings: China Trust Industry Association, China Trust Registration Corporation and China Trust Industry Protection Fund
1. In March 2015, the internal regulatory structure of the China Banking Regulatory Commission was reformed, and the Trust Supervision and Administration Department (previously managed by the non-banking department) was formally established, and trusts were independently supervised. On May 18, 2023, the State Financial Regulatory Administration (SAMR) established on the basis of the China Banking and Insurance Regulatory Commission was officially launched.
2. Founded in May 2005, China Trust Industry Association is a self-regulatory organization in the trust industry, and launched the "Trust Company Industry Rating Guidelines (Trial)" in 2015, referred to as the "Short Sword" system (CRIS) (including four aspects: capital strength indicators, risk management ability indicators, value-added ability indicators and social responsibility indicators. This rating system complements the CBRC's Guidelines for the Supervision of Regulatory Ratings and Classification of Trust Companies (Revised in August 2014).
3. China Trust Registration Corporation (CITIC Deng) was officially inaugurated on December 26, 2016, of which China Bond Deng holds 51% of the shares, 8 trust companies including CITIC Trust, Chongqing Trust, Zhongrong Trust, CCB Trust, Shanghai Trust, Minsheng Trust, AVIC Trust and Ping An Trust respectively hold 3.33%, and China Trust Industry Association and China Trust Protection Fund hold 0.33% and 2% respectively. CITIC Deng's business scope includes: registration of trust products, beneficiary rights information and their changes, establishment and management of trust beneficiary rights accounts, issuance, trading, liquidation, settlement, valuation, information disclosure, inquiry, consulting and training and other services as well as some regulatory functions.
4. The China Trust Industry Protection Fund was established on December 12, 2014, and the protection fund is mainly jointly raised by trust industry market participants to resolve and dispose of trust industry risks.
The scarcity of licenses
The trust industry, together with the banking industry, securities industry and insurance industry, is also the four major financial industries in China, and it is also the field with the widest scope of operation.
China's financial industry operates separately, with banks only doing bank business, insurance only doing insurance business, and securities only doing securities business.
Only Trust is the only financial institution operating in the field of money market, capital market and industrial investment, and its investment methods can be diversified in a variety of ways such as loans, investments, leases, sales and interbank offerings, and at the same time, it can flexibly adjust between markets in a timely manner according to changes in market conditions, so that it can avoid the systemic risks of a single market while sharing the profit opportunities of multiple markets.
That is to say, the function of a trust license is similar to that of a full license, and its unique system design gives the diversity of trust functions and the flexibility of use.
There are currently only 67 trust companies operating normally in the mainland (four others are suspended), and there will be no new additions at present. Compared with thousands of banks, hundreds of brokerages and futures companies in China, trust licenses are arguably the most scarce and valuable of all financial licenses in China.
Because the trust industry license is no longer newly approved, there is no way to establish a new trust company, but can only find a way to acquire a trust company, and the trust company with a very low brand value is also worth more than 10 billion.
For example, many banks want to acquire a trust license, but they are difficult. According to insiders in the trust circle, only four banks have successfully obtained trust licenses so far. They are CCB Trust under China Construction Bank, Bank of Communications Guoxin and Industrial Trust under Industrial Bank of Communications, and Shanghai Trust under Shanghai Pudong Development Bank.
The high yield of the trust
Trusts and banks are both under the supervision of the State Financial Regulatory Administration, and both are the objects of vigorous supervision and strict risk control by the regulatory authorities. Investment income is stable, relatively high: often called the "time deposit" of the rich, because of its income level, its income is several times that of the bank's one-year fixed deposit, and the income is stable at about 7%-9%.
Since 2021, domestic monetary liquidity has been relatively abundant, overall interest rates have declined, and domestic financing costs have decreased; On the other hand, the scale of financing business continued to shrink, and the emergence of standard investment products dragged down the overall average return. The average yield of the announced collective wealth management trust products in 2021 was 6.85%, which was 30 bp lower than in 2020. According to incomplete statistics from public information, the average expected yield of non-standard trust products in December 2022 was 6.70%, a decrease of 0.04 percentage points from the previous month.
Although the return rate of trust has been in a downward trend since 2020, the return is still much higher than that of other fixed income wealth management products such as banks and public funds. Trust insiders have compiled the average rate of return of trusts as follows:
Income trend of collective trust products from 2015 to date (by period)
In view of the multifaceted advantages of trusts, there are more and more natural person investors who buy trusts. Trust insiders learned that on August 23, China Trust Registration Co., Ltd. disclosed that as of the end of the first half of 2022, the total number of trust investors in the trust industry reached 1.3326 million, an increase of 5.64% over the beginning of the year, and the overall growth trend was stable.
In general, the trust is regulated by the State Financial Supervision and Administration and is a veritable regular army, which is not only safe and reliable, but also has high returns.