China Banking Regulatory Commission, Circular on Further Strengthening Market Risk Management of Commercial Banks

Issued: December 16 2006

Main Contents: All banks shall assign a senior management personnel member from the senior management of the head office to be responsible for market risk management work for the whole bank (Article 2). Market risk management of domestic and foreign branches and sub-branches shall be centralized (Article 3). Departments engaging in market risk management and business operation departments that assume risks shall report their work to different senior management personnel members (Article 4).

Each bank shall, on the basis of the current transaction prices of renminbi treasury bonds and related products, adopt generally-accepted international methods to research and establish market-based yield curves for renminbi treasury bonds to be the base for the pricing of renminbi products and risk management (Article 7). Internal audits shall be conducted on the market risk management condition of the whole bank at least once a year, and the audit results shall be reported to the board of directors (Article 10).