A Case Study On The Motivation And Impact Of Ping An Bank’s Issuance Of Secondary Capital Bonds

After the subprime loan crisis in the United States in 2008,secondary capital bonds were generated under the impetus of Financial innovation in various countries.As of the first half of 2022,there are more than 650 types of Tier 2 capital bonds in China.In order to better understand the characteristics and mechanisms of Tier 2 capital bonds,analyze their risks and returns,explore their development trends and market prospects,and improve risk management and supervision in the financial market,it is necessary to study the motivations and impacts of commercial banks issuing Tier 2 capital bonds.Ping An Bank was the first large and medium-sized commercial bank in China to issue Tier 2 capital bonds and has already issued five such bonds.This paper takes Ping An Bank,which has issued a relatively large number of Tier 2 capital bonds,as an example.By analyzing the issuance of Tier 2 capital bonds and introducing their basic terms and characteristics,this paper is based on the optimal capital structure theory and bank capital supervision theory,and adopts comparative analysis and event study methods.On the basis of summarizing the current situation of Ping An Bank’s issuance of Tier 2 capital bonds,this paper analyzes the motivations for and impacts of Ping An Bank’s issuance of Tier 2 capital bonds and draws conclusions.Through the study in this paper,it was found that Ping An Bank’s issuance of Tier 2 capital bonds had two internal and external factors.The internal factors included the need to relieve funding pressure,broaden channels for capital replenishment,optimize capital needs,and ease pressure from non-performing loans.External factors included economic and regulatory reasons.On the other hand,Ping An Bank’s issuance of Tier 2 capital bonds has a positive promoting effect on profitability,asset quality,and growth ability.It can improve Ping An Bank’s capital adequacy ratio in a short period of time,but has a limited positive impact on Ping An Bank’s market value.Additionally,it may cause an increase in asset value volatility in the short term,leading to increased credit risk and potential reputational risk.Finally,based on the conclusions of this paper,relevant countermeasures were proposed for stakeholders.Firstly,Ping An Bank should establish a sound risk control system,improve management level,focus on liquidity management,and strengthen public opinion monitoring and investigation to improve its risk prevention capabilities in all aspects.Secondly,investment institutions should establish a complete credit evaluation system,formulate risk management plans that are suitable for Ping An Bank,conduct comprehensive evaluations of the risks behind the Tier 2 capital bonds issued by Ping An Bank,and make reasonable investments based on their own investment objectives.Thirdly,regulatory agencies should strengthen their supervision of the issuance of Tier 2 capital bonds,enhance information disclosure,improve the relevant legal system for the issuance of Tier 2 capital bonds,prevent market manipulation,provide legal norms for the issuance of Tier 2 capital bonds by Ping An Bank,gradually remove market access restrictions,and promote the healthy development of the Tier 2 capital bond market.