【Financial Str. Release】PBOC amends CP management rules for securities brokers, effective from Sept. 1

Photo taken on March 13, 2018 shows the headquarters of the People's Bank of China. (Xinhua/Cai Yang)

BEIJING, July 27 (Xinhua) -- The People's Bank of China (PBOC), the Chinese central bank, announced its revised rules managing commercial papers (CPs) of securities companies on July 23, reported Xinhua-run Xinhua Finance recently.

The amended rules, which will enter into force from September 1, target regulating CP issuance and transaction of securities brokers to better protect investors and boost money market development, according to PBOC.

CPs, which are money market vehicles regulated and supervised by PBOC, refer here to bonds issued by securities firms on China's interbank bond market with a term of one year at most.

PBOC will apply balances management for CPs of securities brokers. For securities firms, balances of their outstanding CPs and other short-term financing instruments shall not exceed 60 percent of their net capital. Other short-term financing vehicles include interbank borrowings and short-term corporate bills, both of whose term shall be no longer than one year, including one year.

Chinese central bank said it may adjust, on basis of money market liquidity and financial market running conditions, the ceiling of the proportion of securities brokers' CP balances in their net capital and the allowed longest term of their CPs to be offered.

PBOC will also conduct flexible half-yearly adjustment to and publicize the upper limit of the proportion of each securities broker's CP balances in its net capital in accordance with the changes in the securities firm's net capital and balances of other short-term financing instruments.

Under the amended rules, securities firms can determine, as they will, the term of each batch of their CPs to be issued, which is restricted to be no longer than one year.

Apart from this, they are prohibited to subscribe directly or indirectly CPs issued by themselves. Proceeds of their CPs are banned to finance their fixed assets investment, business outlets construction, stock market investment, funding for their clients' securities transactions, and their own long-term equities investment.

Upon enforcement of the rules, the past version that PBOC promulgated in October 2004 will be annulled. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)