Original title: China Merchants BankDetailed explanation of "Cross-border LiCaiTong": system design, investment products, risk management …...

Economic observation Network reporter Lao YingyingOn October 18, the official websites of the Guangzhou Branch of the people's Bank of China and the central branch of Shenzhen announced the list of the first batch of pilot banks of "Cross-Border LiCaiTong", including China Merchants Bank,Ping an BankA number of banks, such as Guangdong Development Bank, were shortlisted.

According to the reporter's understanding, as early as 2019, China Merchants Bank, under the guidance of the regulatory department, worked with wholly-owned subsidiaries China Merchants Yonglong Bank and China Banking to create a "cross-border LiCaiTong" service system with China Merchants Bank characteristics. Research and preparations were carried out from the aspects of investment product selection, system platform construction, customer experience management, and so on. At present, cross-border LiCaiTong business is led by China Merchants Bank Wealth platform Department, with the participation of the Research Institute, Private Banking Department, Operations Management Department, legal Compliance Department, Information Technology Department, Interbank customer Department, risk Management Department, China Merchants Yonglong Bank and major branches in the Greater Bay area.

A relevant person in charge of China Merchants Bank told the Economic Observer Network that in terms of cross-border LiCaiTong business, China Merchants Bank currently cooperates with only one Hong Kong and Macao bank of China Merchants Yonglong Bank, because the legal relationship and responsibility relationship between the mother bank and the subsidiary bank, and the system docking are relatively smoother. System flow design in the system process design, China Merchants Bank adopted "online and offline"The light operation mode of "combination" reduces or avoids the presence of customers as far as possible within the scope of supervision, which not only facilitates customers but also reduces the pressure on the operation and service of the network. In terms of products, "Beixiangtong" comprehensively considered factors such as low volatility, stability and historical performance, selected the best of the existing products, and finally selected 426 public finance in 25 sub-series; in terms of "Nanxiangtong", it is dominated by China Merchants Wing Lung Bank, whose products are mainly public offering funds approved by Hong Kong regulators and registered in Hong Kong, with a product number of about 80, with a risk rating of R3 and below.

It is understood that China Merchants Bank is working with China Merchants Yonglong Bank to carry out cross-border LiCaiTong business. China Merchants Wing Lung Bank now has 41 outlets in mainland China, Hong Kong, Macau and overseas, including China Merchants Wing Lung Private Banking Center. China Merchants Bank successfully acquired Wing Lung Bank in 2008 and changed its name to China Merchants Wing Lung Bank in 2018. In the cross-border LiCaiTong business, China Merchants Bank signed a cooperation agreement with China Merchants Yonglong Bank and established an one-to-one corresponding relationship at the initial stage of the pilot project. The two are cooperative banks of "south-to-south" and "north-to-north", clarifying the division of responsibilities in all aspects of the business.

A relevant person in charge of China Merchants Bank told the Economic Observer Network that in terms of cross-border LiCaiTong business, China Merchants Bank currently cooperates with only one Hong Kong and Macao bank of China Merchants Yonglong Bank, because the legal relationship and responsibility relationship between the mother bank and the subsidiary bank, and the system docking are relatively smoother. Therefore, from the current reported plan, China Merchants Bank is mainly to link up with China Merchants Yonglong Bank from the product, system, system, process and other aspects.

China Merchants Bank adopts the light operation mode of "combination of online and offline" in the system process design, which reduces or avoids the presence of customers as much as possible within the scope of supervision, which not only facilitates customers but also reduces the pressure on the operation and service of the network.

In terms of Beixiangtong, for Hong Kong and Macao customers who already have a Dawan area branch account, as long as China Merchants Bank App signs a business agreement online, binds the remittance account of China Merchants Yonglong Bank, and applies for the northbound pass function, customers can purchase or redeem investment and wealth management products directly through China Merchants Bank's self-help processing, and there is no need to visit the Dawan area branch network in person to meet customers' cross-border financial management and investment needs under the inconvenience of customs clearance. However, for new customers, customers still need to open accounts at the branches of the Dawan area in person.

In terms of southward access, China Merchants Bank has completed the relevant system development, which can meet the requirements of customers' southward "witnessing the opening of accounts". In the links of qualification examination, function opening, domestic and foreign account binding, customer remittance and so on, customers do not need to visit the branch of China Merchants Yonglong Bank in person, and the relevant business information submission and filing are also centrally processed by the background operation team.

China Merchants Bank and China Merchants Yonglong Bank system, based on the design of special accounts, automatically implement closed management of "cross-border LiCaiTong" business funds and assets, for "north-to-north" and "south-to-south". After the cross-border RMB is remitted into the investment account, it is only used to purchase designated investment wealth management products, or to remit the dividends, redemptions and maturing funds of the products to the bound remittance account, the customer cannot use the funds for other non-"cross-border LiCaiTong" purposes. The funds from the unbound remittance account cannot be remitted to the LiCaiTong special account, and the closed management of the special account of funds and assets cannot be broken through in any other form. Investment products can be chosen through cross-border LiCaiTong, which investment products can customers buy?

It is reported that China Merchants Bank cross-border LiCaiTong supports both "north-to-north" and "south-to-south" links. Among them, the products that can be purchased by "Beixiangtong" include the public financial products issued and managed by China Banking Corporation and the public funds managed by some fund companies. the selection of specific products follows the principle of "steady start and risk control".

The person in charge of CMB Finance told the Economic Observer Network that taking into account such factors as low volatility, stability and historical performance, CMB Finance, together with the parent bank, selected the best of the existing products, and finally selected 426 public finance companies. These products include 25 sub-series, including fixed-income products such as "Jinding", which are familiar to customers, dividend-sharing products with absolute income such as "abundant", and "global momentum" that can win the rotational income of all kinds of overseas assets. The risk level of the product is mainly R2 and R3, and the product term is also very flexible, including daily opening, monthly opening, half a year, one year and so on.

"what does it mean to choose the best among the best? In fact, it depends on whether the product will fluctuate greatly, which mainly comes from the proportion of risky assets and interest rates. Our fixed income plus part, the equity exposure control is relatively small, the duration is also relatively short. In the past, some of our products fluctuated greatly and their duration was relatively long. At this stage, such products were not included in the northbound products. " The person in charge said.

He also said that during the preparation of cross-border LiCaiTong, China Merchants Yonglong Bank conducted special research on customers in Hong Kong and Macao. They found that most of the customers of China Merchants Wing Lung Bank prefer fixed income plus, and many of them hold RMB investment products, of which more than 50% are fixed income and fixed income plus, and there are customers with an annual household income of more than HK $1 million. They also account for the highest proportion of fixed-income investment assets. After their calculations, customers in Hong Kong and Macao do not expect a high rate of return on domestic RMB investment goods, and most of them are less than 5%. China Merchants Bank still has the conditions to do so.

At the beginning, China Merchants Bank will focus on the stock of products, and in the future, personalized innovation can be loaded around more topics according to the needs and preferences of customers in Hong Kong and Macao. For example, for the management of exchange rate risk, we can consider adding a design linked to the US dollar index; for example, creating a Greater Bay area concept product with the bonds or claims of enterprises in the Greater Bay area as the underlying assets; it can also be used as a reference for the international rating more recognized by Hong Kong and Macao investors to select appropriate underlying assets for product creation.

"overseas investors are sometimes worried about the underlying assets, and they tend to recognize international ratings. in the past, China Banking had its own internal evaluation methods, not especially external ratings; but if this is not enough, we can create some products based on the rating results of the three major foreign rating companies in the future. We launched a low-level asset investment high-rated financial bond a few months ago.

The products of industrial credit can also be created in the future, which are more recognized by overseas investors and do underlying assets with reference to international ratings. " The person in charge said.

As for "Nanxiangtong", it is mainly selected by China Merchants Wing Lung Bank. Its products are mainly public offering funds approved by Hong Kong regulators and registered in Hong Kong. The number of products is about 80, with a risk rating of R3 and below.