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In order to regulate the foreign exchange margin trading business of banking institutions and effectively ward off inherent risks, the CBRC hereby issues a notice on the following items:
I. Given the market risk, operational risk and IT risk as well as the risk derived from the inadequate evaluation of customers are becoming increasingly apparent in banks’ foreign exchange margin trades, the CBRC will formulate relevant rules on the trading business by banking institutions in order to regulate the market.
II. Before the promulgation of relevant rules, banks are not allowed to conduct the foreign exchange margin trading business or do so in a disguised form.
III. The banks, which have engaged in the business before the issuance of this notice, should no longer provide this service to new customers or conduct new transactions for customers already in this business (liquidation of margin account excluded). Liquidation at a proper and earliest time is recommended to the customers already in this business.
IV. The banks already engaged in the business shall, within 5 days after the issuance of this notice, deliver to the CBRC written reports in duplicate on the number of customers in this business, their total margin, aggregate positions, overall profitability and adopted risk management measures. In addition, a monthly report to the CBRC on the above-mentioned information is always required within the first 5 days of each month unless all the involved customers complete the liquidation of margin accounts.
V. Where any bank goes against this notice, the CBRC will make punishment in accordance with laws and regulations.
The foreign exchange margin trading business in this notice refers to a leveraged foreign exchange investment service provided by banking institutions for the purpose of pursuing profits in foreign exchange transactions, through which, investors’ certain amount of deposited margin can be amplified through leverage, thus enabling their contractual capital in actual transactions much larger than the deposited margin.
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