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China economy

Chinese watchdogs investigate share-backed loans to tamp down risk

PUBLISHED : Saturday, 10 February, 2018, 2:47pm
UPDATED : Saturday, 10 February, 2018, 10:57pm

Securities regulators in several provinces of China are investigating the use of shares as collateral for financing activities to curb potential risks, the state-owned Securities Times newspaper reported on Saturday.

The provincial regulators had launched an “intensive investigation” into stock-backed borrowing by major shareholders of listed firms, the paper said.

The investigations focus on listed firms with greater to exposure to such financing, including details on their shareholders and financial transactions, the paper said.

China’s banking regulator steps up fight against financial risk amid threat of ‘chaos’ in sector

In September, China’s securities regulator published draft rules to restrict the use of stocks as collateral for loans, as part of efforts to reduce leverage in the financial system and ward off systemic risks.

The rules, which have been finalised and are due to be implemented from March 12, are aimed at curbing leverage and reducing risk if stock prices fall sharply.

On Friday, Chinese stocks suffered their worst day in almost two years, with a plunge by blue-chips dragging the main indexes into correction territory after steep falls overnight for US stocks.