China's securities companies had a good year in 2014, this year's volatility, however, might give them a lesson in risk management, according to a KPMG China survey publicized Tuesday.
The ninth annual survey by KPMG of 119 securities companies in Chinese mainland found 2014 to have been a bumper year. Total income rose 64 percent year on year to RMB 255.3 billion while net profits rose 121 percent to RMB 94.9 billion.
Reflecting the intense competition among brokerage firms, the survey showed a drop in the average commission rate. With further developments in Internet finance and policy issuance, the average brokerage commission rate has room to decline further, it warned.
China saw its capital market open up further in 2015, with a number of Chinese securities companies establishing themselves overseas and some Hong Kong- or Taiwan-owned financial institutions actively planning to establish fully licensed securities companies on the Chinese mainland.
The securities market experienced increased volatility in 2015, especially between June and July; that should be a lesson for all, said Abby Wang, partner and head of Securities and Investment Management (China), the auditor.
"Securities companies should be aware of how important risk management is now. There is urgent need for the industry to build a solid foundation based in information systems, risk management and internal control to prevent risks," said Wang.
"The recent volatility in China's equities markets has given the sector a timely reminder of the importance of proactive risk management. We believe China's securities sector has a bright future as long as it remains alert during the good times and takes prudent action to ensure that the industry is prepared for the downside," said Bonn Liu, another partner at KPMG China.
