Abstract
The discounting policy refers to the policy of the bill of exchange in the use of the central bank to borrow funds from the previous special borrowing and the promissory note to the final agreement on the transfer of funds to the party. On the one hand, discount policy can sizeably improve the financial capital performance of enterprises. On the other hand, it can also stay away from a lot of reputational risk and legal risks to the governments, enterprises and individuals ,etc. After summarizing the overseas discount policy, this paper points out that the management of China’s central bank and state bank discount should combine the countries financial policy to make the discount possible in a healthy development.
Key words: discount policy; promissory note;Management
Introduction
Discounting policy, referring to the policy of the bill of exchange in the use of the central bank accepting the note from the previous special borrowing and the promissory note to the final agreement on the transfer of the funds from lenders to bidders in the financial capital system, means that the central bank supports official account holders or banks to business units，these units will pass in discount bill of exchange from the holder, in turn, the central bank pays off at present. Of course, when the central bank receives repayment for borrowing, the paid-off action should correnspondently be taken place, so as to reduct overdue accounts and control risk. As a result, the administrative area, financial circle and economic operation can be extremely influenced and the management of banks and enterprises get grown(Xu and al.2014).
To sum up, with the help of the discounting policy, commercial bonds get supplied in a large quantity, which will definitely benefit the credit circulation and play an important role in the commercial bond loan business and It also supports the development of enterprise fund-raising resources, while making full use of funds and optimizing capital structure. Under the premise of getting away from reputation risk, legal risk etc., it will become the focus of financial policy circle, and its practice implications will drive more enterprise projects and banks.
Evaluation of domestic discount policy
In recent years, with the continuous deepening of Chinas financial reform, advancing the development of the balance sheet management, discounting policy of domestic banks has also become more prevalent. Banks make full use of banking system technology, operational management, banking channels and other resources, to improve the risk control system and discounting process management, which touches on two aspects of balance sheet management and income resources management. Balance sheet management includes the discounting business of bills, deposits, funds, etc., to ensure the quality of deposit, while income management includes credit assets management and the exchange yields, transaction fees and other inter-related reference income sources. The efficiency and progress of discounting policy will affect the transformation of banking products and the development of other financial derivatives.
Besides, the rapid development of the economic structure and the financial system of China has also benefited from the discount policy of the central bank. The centrally-managed discount of the central bank has become an important policy of tackling income, paying amount, clearing and balance sheet management in China. Its practice will obviously optimize the investment and loan business, meanwhile reduce the fund-raising cost of both sides and reduce the influence of capital market fluctuations.
Evaluation of international discount policy
As early as the 1960s, represented by the FRED system in the USA, the international discount policies have started to operate in the form of open market discount rate operations, and its practice has reached over 5,000 times in the past decade(Nwankwo and al., 2016). Although the discount rate management of the Federal Reserve is always enabled, the system of principal-proportion credit structuring reveals the importance of reserve accounts in the discount market. With the aid of government cash reserve account, the Federal Reserve cao free funds to achieving specific goals. Under the tradition discount policy, the funds will be settled by the central bank on the basis of balance sheet crediting and discount transactions. And, this practice is regarded as the basis of US financial system.
Conclusions
In conclusion, discount policy in the market affects the capital resources and its management so that it can be operated more efficiently. The practice of exchange of repayment effectiveness and economic entities as well as the economic organizations, are benefitted particularly by this policy The discounting policy has made great progress both in domestic and international. But due to our country’s distinct financial system and diverse enterprise constitution, the understanding and application of discount policy require further improvement. Therefore, the management of discounting policy of Chinese central bank and state bank should combine the countries financial policy to make the discounting policy applicable and the healthy development of discounting policy required.
References
Nwankwo, S., Neaime, S.A., Singh, P. and Najand, M., 2016. Exploring Financial Fragility, Regulations and Monetary Policy when Banks Discount Government Debt. SSRN Electronic Journal.
Xu, S., Yang, L. and Yi, Y., 2014. A Study of Capacity Building on Finance Credit Management of Nationwide Sino-foreign Enterprises. Management Review, (10), pp.111-114.
