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    CBIRC Clarifies Derivatives Rules, Notes Progress in Bank Governance

    December 03, 2021

    The China Banking and Insurance Regulatory Commission (CBIRC) published a Notice on application of rules related to derivatives counterparties, guiding opinions in support of technological innovations, and an update on the status of corporate governance in the banking and insurance sectors. The recently published Notice contains supplementary information for the application of the rules for measurement of default risk assets of derivatives counterparties. The rules stipulate that "qualified transactions between commercial banks and financial institutions can manage risk exposures and withdraw capital on a net basis." The Notice also aims to clarify the scope of the qualified master agreement and improve the "identification standards for margin derivatives transactions."

    In another development, CBIRC published “Guiding Opinions on Supporting High-level Technological Self-reliance in the Banking and Insurance Industry,” along with the associated questions and answers (Q&A).In the "Guiding Opinion," CBIRC calls for more financial support for technological innovations. CBIRC also notes that it is necessary to explore new models of technological credit services and encourage the use of more flexible interest rate pricing and interest repayment methods, also stating that the regulator will actively support the direct financing of technology companies.

    Finally, in the statement on corporate governance, CBIRC explained that it has achieved improvements in corporate governance in the banking and insurance sectors. In the past two years, CBIRC has steadily promoted the implementation of "Three-year Action Plan for Improving Corporate Governance in the Banking and Insurance Industry (2020-2022).” The regulator has focused on strengthening the development of regulations, continuously deepening the reform of corporate governance, effectively preventing and resolving financial risks, and promoting the steady improvement of the quality of corporate governance in the banking and insurance industry. Going forward, CBIRC plans to further strengthen supervision and reform the corporate governance of institutions by regulating the behavior and related transactions of major shareholders, optimizing the structure and operation mechanism of the board of directors, and improving the effectiveness of supervision.

     

    Related Links (in Chinese)

    Keywords: Asia Pacific, China, Banking, Derivatives, Regulatory Capital, Default Risk, Counterparty Credit Risk, Master Netting Agreement, Netting Contract, Fintech, Governance, CBIRC

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