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UPDATE 1-China's Sealand Sec: Forged bond pacts total $2.4 bln at most
December 22, 2016 / 10:51 AM / a year ago

UPDATE 1-China's Sealand Sec: Forged bond pacts total $2.4 bln at most

(Adds details, quotes)

SHANGHAI, Dec 22 (Reuters) - Sealand Securities, the Chinese brokerage at the heart of a bond scandal that has rocked markets, said on Thursday it has reached “consensus” with its counterparties to jointly share potential losses stemming from “forged” bond agreements totaling no more than 16.5 billion yuan ($2.38 billion).

The statement, which came a day after Sealand promised to take responsibility, should further help ease fears of a liquidity crunch stemming from a breakdown of trust between financial institutions.

In the statement to the Shenzhen Stock Exchange, Sealand said it was operating normally and that liquidity risks were under control.

News about the forged bond agreements triggered volatility in China’s bond market.

“The bonds will continue to be held by all counterparties,” Sealand Securities said, adding it would take “full responsibility” for bonds issued by private institutions, but will further negotiate with counterparties to share potential losses from government-backed debts.

On Wednesday, the brokerage said it would take responsibility for the bond agreements, after earlier blaming two of its employees.

The filings by Sealand in the past two days have “improved market sentiment”, said a trader at a Chinese bank in Shanghai.

Sealand Securities said on Tuesday that it was inspected by the country’s top securities regulator.

$1 = 6.9466 Chinese yuan Reporting by Winni Zhou and David Stanway; Editing by Richard Borsuk

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