CBRC Moves to Regulate Derivatives

By staff reporter Zhang Man

(.com.cn) Banking Regulators will ban domestic banks from trading derivatives attached to overseas financial institutions as they move to limit risk in the sector following massive losses by some Chinese companies.

In an Aug. 5 online circular, the China Banking Regulatory Commission also said banks should assess the risk of domestic derivatives, as well as their relevance to the needs of the real economy, and provide clients with monthly updates on the status of their contracts.

Foreign banks have been assisting Chinese banks to market and sell overseas derivatives to domestic clients. A number of Chinese banks have strategic partnerships with overseas financial institutions, including tie-ups between Goldman Sachs and ICBC and another between China Construction Bank and Bank of America.