CBRC Bans Chinese Banks from Trading Treasury Futures

[thenews]

China Banking Regulatory Commission said it will ban banks from trading treasury futures due to high leverage implying high risk involved.

Beijing - The China Banking Regulatory Commission (CBRC) said it will not allow Chinese banks to trade treasury futures in the near term, following discussions with other government ministries.

The banking regulator said treasury futures uses high leverage ratios, which can amplify market volatility in extreme conditions. The CBRC noted increasing bond defaults in the domestic market, with greater volatility in the futures market and that government regulators are working on tightening supervision. T

he banking regulator made the comments in response to a proposal from China's People's Political Consultative Conference which called for commercial banks to be allowed to trade treasury futures as soon as possible.

Banks are the largest investor group in China's interbank market, holding nearly two thirds of outstanding bonds. But banks are banned access to treasury futures trading, leaving them no tools to hedge risk.