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Tags: China | Financial Markets | Infrastructure | Money | China foreign exchange trades | FX

China Proposes Cap on Banks' Proprietary FX Trades

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(Dreamstime)

Friday, 19 November 2021 07:56 AM

A central bank led self-regulatory group that helps oversee China's foreign exchange industry has asked commercial banks to cap the size of their proprietary trading accounts, five sources with direct knowledge of the matter said on Friday.

One of the sources said that the aim was to curb financial institutions from speculating on the yuan at a time when the Chinese currency has been strengthening.

China's Foreign Exchange Market Self-Discipline Mechanism is a committee of central bank and commercial bank representatives and is supervised by the People's Bank of China.

It has told banks that if the volume of their proprietary trade rises 50% from a year earlier or exceeds 15 times the amount they execute on behalf of their clients, their businesses will be further analyzed and investigated, said the sources, some of whom were told of the plan via email.

The sources from within some of the banks spoke on the condition of anonymity as they were not authorized to publicly discuss the issue. There was no mention of any effective date for this measure.

The regulatory body said in a statement late Thursday that Chinese financial institutions should actively provide currency hedging services for companies, but they should not help companies speculate in currencies.

China's tightly managed currency, the yuan, is up nearly 3% against the U.S. dollar since March and has stayed strong even as the dollar rose against most other currencies.

© 2022 Thomson/Reuters. All rights reserved.


StreetTalk
A central bank led self-regulatory group that helps oversee China's foreign exchange industry has asked commercial banks to cap the size of their proprietary trading accounts, five sources with direct knowledge of the matter said on Friday.
China foreign exchange trades, FX
236
2021-56-19
Friday, 19 November 2021 07:56 AM
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