Regulators draft bond guidelines

According to new guidelines, qualified commercial banks aiming to issue bonds first must get approval from the China Banking Regulatory Commission. They then must notify the China Securities Regulatory Commission. [Photo / China Daily]

New policies will allow domestic banks to issue corporate paper

The China Securities Regulatory Commission and China Banking Regulatory Commission have drafted guidelines that will allow domestic commercial banks to issue corporate bonds to replenish their capital, the CSRC said on Friday.

The guidelines give commercial banks more ways to raise new capital and promote the development of the Chinese bond market, a CSRC spokesman said.

"Commercial banks should focus on increasing their income and reducing their expenditure to bolster their capital and improve the quality of their capital and then prudently explore external financing," the spokesman added.

Qualified issuers under the guidelines are Chinese commercial banks listed on the Shenzhen or Shanghai stock exchanges, as well as those listed on foreign stock exchanges, and those that are applying for domestic initial public offerings.

The guidelines potentially allow other domestic commercial banks to issue bonds if the CSRC revises the requirements.

Qualified commercial banks aiming to issue bonds first must get approval from the CBRC. They then must notify the CSRC.

To minimize risks, stock exchanges should examine the asset and credit positions of potential issuers and decide what types of investors are eligible to buy the banks' issues, according to the guidelines.

Qualified banks should make full disclosures in each prospectus.

Bonds issued via private placements may be directly registered on stock exchanges after gaining approval by the CBRC.

But exchanges' registration processes, trading specifications and disclosure requirements for the bonds still require approval by the CSRC.

Deng Haiqing, an analyst in the fixed income department at Hong Yuan Securities Co Ltd, told China Daily the guidelines will be a positive force for cultivating a more mature bond market in China and commercial banks can be important participants.

Chinese commercial banks also need wider access to the bond market, because equity financing is not wise when their share prices are low.

Deng added that the move also shows that large Chinese commercial banks are seeking ways to maintain their leading positions in the market before interest rate liberalization reform proceeds.