Thursday January 26 2017

News Source: Global Exchanges

Focus: Other

Type: General




Shenzhen Stock Exchange (SZSE) recently issued Guidelines on Risk Management over the Duration of Corporate Bonds and is currently inviting public comments on their proposals.

This is an act to consolidate the risk management system of the bond market, enhance market players’ awareness and capability of active management of bond credit risk, and protect investors’ legitimate rights and interests. In accordance with the risk-oriented systematic management principle, the Guideline defines market players’ responsibilities of risk management during risk monitoring, screening, pre-warning, elimination and handling and primarily establishes a sustainable and normalised risk management system that is centred on bond issuers and trustees.

To strengthen market players’ practice of risk management responsibility and define a working mechanism that both performs its duties and cooperates with division of labor – the Guidance requires that bond issuers should formulate a management system for the bond principal and interest payment, ensure repayment funds in advance, perform the obligation of information disclosure, prevent and solve bond risk events, and cooperate with bond trustees and other competent institutions to carry out the tasks on risk management.

Additionally, the Guidelines, with consideration of domestic and overseas regulatory experience in risk management, tentatively state the basic standards on the classification of bond risks and classifies corporate bonds into normal, attention-required, risky and default types as per the extent of credit risk.

Furthermore, in order to establish a regular and irregular risk management report system, the Guidelines stipulate that bond trustees should biannually submit a report to SZSE stating the bond risk classification within their entrusted management scope and the situation of work development on credit risk management.

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