Chinese Regulator Issues New Rules To Regulate Derivatives Transactions

In a move designed to protect onshore (domestic) Chinese banks and their customers from exposure to derivative products which are perceived as being high risk, the China Banking Regulatory Commission (CBRC) has unveiled stringent new rules to further regulate the issue and use of derivative products.

The Notice on Further Strengthening Risk Management for Derivatives Transactions between Banking Financial Institutions and Corporate Clients (Notice), issued on 31 July 2009, imposes restrictions on the ability of onshore banks to engage in derivatives transactions with onshore corporate clients together with significant ongoing administrative obligations on both the clients and banks.