November 1, 2018 / 8:16 AM / 10 months ago

China tells banks to issue bonds with credit mitigation tools

BEIJING/SHANGHAI, Nov 1 (Reuters) - China’s central bank has told some commercial banks to issue corporate bonds using credit risk mitigation (CRM) tools, said two sources familiar with the matter, amid a broad push by regulators to ease funding conditions for private firms.

The People’s Bank of China (PBOC) gave the instructions at a meeting with the banks on Wednesday. The CRM tools should be created by the lead underwriter together with China Bond Insurance Co Ltd on a case-by-case basis, the sources said.

The PBOC did not immediately respond to a faxed request for comment.

China has introduced a string of measures in recent weeks to support small- and medium-sized enterprises amid a slumping stock market, a weakening economy and a bitter trade war with the United States.

Two Chinese investment banks are set to launch China’s first credit derivative tools this week that would allow investors to hedge default risks associated with exchange-traded corporate bonds, a source with direct knowledge of the matter told Reuters last week. (Reporting by Hou Xiangming, Li Zheng and Andrew Galbraith; Editing by Simon Cameron-Moore)

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