BEIJING, Aug. 7 (Xinhua) -- China's central bank unveiled on August 4 an opinion-seeking circular to further boost over-the-counter (OTC) bond business on the country's interbank bond market, reported Xinhua Finance.
The circular, which contains 12 articles, loosens restrictions over institutional investors' investment in interbank bond market via the OTC channels and stresses at the same time internal control of OTC service providers and investor suitability management to shore up participation.
In 2002, OTC bond business was rolled out on China's interbank bond market to increase channels for individuals and companies to purchase T-bonds. In 2016, a set of rules was promulgated by the People's Bank of China (PBOC), the central bank, to further expand the bond varieties, trading ways and investor types for the OTC market.
On basis of the rules, the circular further defines the scale of eligible institutional investors for the OTC bond business on interbank bond market, which includes licensed financial institutions, asset management institutions, and the various products under management of these institutions.
It adds financial bonds, corporate bonds and etc. into the basket of investable OTC products for eligible institutional investors on OTC market and puts bond lending and derivatives into the scale of permitted OTC trading products.
The circular also allows the aforementioned OTC institutional investors to invest in all types of bond products traded on the interbank bond market and eases restrictions over bond account opening with the OTC bond business service providers.
With no needs to apply for approval of the PBOC, institutional investors that have opened bond accounts in registration, custody and settlement service institutions on interbank bond market are permitted to open bond accounts with OTC bond business service providers.
Apart from these, the circular requires OTC bond business service institutions to establish reasonable investor suitability management system and strengthen internal control management and systemic construction to appropriately fend off risks.
Currently, OTC bond business on China's interbank bond market is relatively small in size and for institutional investors, it is still in an elementary stage.
Under such circumstances, it is necessary to map out more detailed regulations to support government bond market expansion, more effective investment of residential savings and accelerate establishment of a multi-tiered bond market in China.
Statistics with PBOC showed that total bond balances on China's interbank bond market stood at 130.2 trillion yuan by the end of June while bonds under custody under the OTC business of commercial banks were 44.2 billion yuan. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
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