China has set new
rules for the bond market to tackle unofficial deals, the
latest in a flurry of new regulations aimed at reducing
financial risk and deleveraging.
Issued by the People’s Bank of China, China
Banking Regulatory Commission (CBRC), China Securities
Regulation Commission and China Insurance Regulatory
Commission, the regulations focus on banning deals carried out
outside of the official framework, and place more scrutiny over
bond repurchase and bond forward transactions.
Financial institutions are required to report financial data
to regulators if their outstanding repurchase agreements and
volumes exceed a certain cap. All bond repurchase and bond
forward transactions must be signed in written form and any
under the table deals are banned.
The new rules aim to ban the daichi or pledged financing
practice in China. The practice involves repurchase agreements
(repo) made through informal verbal agreements.The new rule
came into effect immediately after it...