PRC banks should take cautious approach when trading bonds

Commercial Chinese banks should raise their risk control capacity and be wary of underlying risks in different transactional mechanisms, say counsel.

The China Securities Regulatory Commission (CSRC) and other regulators have given the green light to listed local banks, allowing them to make bond transactions on domestic stock exchanges. The approval, which ends a 13-year restriction on banks from trading bonds on exchanges, is expected to raise the share of direct financings.

According to Fanny Yi, a Shanghai-based senior partner of Allbright Law Offices, the move would increase the trading volume of all types of bonds and enlarge the scale of financing. “It would also expand the channels for the utilisation of banks' funds,” she said.