Shortly after the 2006 New Year, China Everbright Bank (CEB) took the lead in launching another new product of Sunshine Wealth Management– “Sunshine Living” Fixed Rate Housing Loan, which expanded the scope of financing to include liabilities and risk-avoidance as well.

It is known that the unique characteristic of fixed rate housing loan is that the interest rate is set and fixed when the loan agreement is signed. No matter how interest rate fluctuates within the term of the loan, borrowers pay interest according to the fixed rate determined, instead of following the changes of the market. Industry experts have pointed out that fixed rate housing loan is good news for borrowers who wish to evade future interest rate risks.

The fixed rate housing loan further enriches the product line of Sunshine Wealth Management, and is the latest masterpiece of CEB aimed at boosting the brand image of “Sunshine”. In 2004, thanks to repeated innovations on local and foreign currencies wealth management, CEB has already taken up a significant share of the wealth management market: products such as Plan A, Plan B, Plan E and Plan A+ have become hot topics for discussion. The “Sunshine Wealth Management” brand is rapidly gaining fame, becoming the leader of the market.

The success of CEB strengthens its confidence in the philosophy that development and profit must be achieved through innovation. Since last year, CEB has come out on top in a series of market competitions and product innovations, especially in several large-scale national projects. By winning this tender, CEB became the agency bank for collecting non-tax revenue for the Central Government and the only commercial bank authorized to act as the fiscal agent of the State Treasury in three projects. Then, CEB obtained the qualification to be a managing underwriter of short-term financial bonds. In 2005, CEB issued short-term financing bonds of RMB48 billion for over ten major enterprises including China Minmetals Corporation, China Unicom, Jiangsu Communications, Shenhua Group, etc, taking up 30% of total issuing volume in the market and ranking at the top both in terms of the number of projects managed and the total monetary value involved. In August 2005, CEB became the custodian and account manager for Enterprise Annuity Fund in the qualification verification of managing Enterprise Annuity Fund.

According to statistics provided by CEB, in 2005, the sales of CEB’s wealth management products reached RMB30 billion, an increase of RMB13 billion over the previous year, up almost 80%. Due to strong development of the wealth management business, the total savings balance of CEB had reached more than RMB 79 billion by the end of 2005.

It is understood that CEB made full preparation before launching the fixed rate housing loan. Since the beginning of last year, as the return rate of Renminbi bonds dropped, conventional wealth management products that mainly targeted bonds encountered formidable difficulties in design and sales. In the face of these challenges, the leadership level and various departments of CEB have always stayed calm and made rational choices. On the one hand, CEB was fully aware of the fact that Renminbi wealth management based on interest rate liberalization would inevitably face the risks of market fluctuation. On the other hand, the reform of interest rate liberalization was carried out on a full scale, and Renminbi businesses of commercial banks were highly homogenous, which might result in low level price competition. Under this situation, CEB explored business channels, made a breakthrough of the conventional business concept that focused solely on raising capital returns, and expanded the scope of wealth management to include liabilities and risk-avoidance. The launching of “Sunshine Living” Fixed Rate Housing Loan fully reflected CEB’s ambition to better meet needs of customers and boost innovation, so as to become the trend setter of the domestic wealth management market.

Currently, the interest rates for mid-term and long-term loans issued by domestic commercial banks are adjusted on a yearly or even monthly basis, thus interest rate risks are assumed solely by borrowers. Housing loans normally have relatively long maturity periods; therefore, borrowers must constantly face interest-rate risks since the exact amount of interest expenditure is uncertain. Right now, the interest rate risks faced by borrowers are of particular importance due to an expectation of interest rates going upward when they are at their lowest in thirteen years.

Relevant competent authorities have adjusted the conventional way of calculating interest rate in recently released documents. It is clearly stated that, the interest rates for mid-term and long-term Renminbi loans should be set by borrowers and lenders according to business principles, rather than on a yearly basis; within the term of the loan, the rates may be adjusted by month, by season or by year; fixed interest rate may also be applied. The China Real Estate Finance Report released by the Central Bank on August 15th, 2005 gives signal that commercial banks are permitted to launch fixed rate housing loan. In the Report, the part titled “prevent financial risks and promote a healthy development of the real estate sector” explicitly states that “It is worthy of consideration that commercial banks may be permitted to launch fixed rate housing loan”. Therefore, “Sunshine Living” Fixed Rate Housing Loan launched by CEB is in complete compliance with the policies put forward by relevant regulatory departments. Aside from providing the necessary financing needs to property buyers, “Sunshine Living” Fixed Rate Housing Loan helps borrowers to avoid risks of uncertainty in interest-rate expenditure caused by rate fluctuations, thus is an efficient tool to avoid interest-rate risks.

As an important new member of the “Sunshine Living” family, the main characteristic of Fixed Rate Housing Loan is that a definite interest rate is set for the borrower based on CEB’s in-depth analysis and precise calculation of interest rates for deposit and loan; and the borrower is free to choose an interest-rate calculation plan based on his/her own expectation of future interest rate and his/he risk preference. CEB plans to design more products to further enrich the “Sunshine Living” product line.

As explained by the relevant department head of CEB, on the one hand, CEB will restructure assets and liabilities through risk pricing and avoid risks by adopting multiple means such as using appropriate financial instruments; on the other hand, relying on its risk management ability and based on continuous innovations, CEB will efficiently manages the risks it bears to meet the needs of borrowers for financing and risk-avoidance and make profits in the process, creating a win-win situation for both the bank and the customer.