China’s financial regulators have suspended new debt product on risk concerns

26 Mar, 2021 10:16
source: Singularity Financial

Singularity Financial Hong Kong March 26, 2021 – China’s financial regulators have suspended the issuance of a new type of financing product known as standardized commercial paper (SCP) less than two years after it was introduced amid concern over the risks attached to the instruments, an industry participant told Caixin.

Banks suspended their SCP business after banking regulators issued “window guidance,” the source said. “Regulators notified banks by phone to tell them to stop, saying that some business risks were not being controlled well,” the source said. Although securities firms are still permitted to handle the products, none dare to do that in the current environment, the source added.

From July last year, when SCP regulations issued by the central bank took effect, to the end of December, 58 such products were sold, raising a total of 6.2 billion yuan ($942.7 million), analysts from brokerage Huachuang Securities Co. Ltd. wrote in Caixin’s Wednesday report. However, no SCP products have been issued since beginning of 2021.

Shanghai Commercial Paper Exchange Corp. Ltd. (SCPE), which operates the national bill trading platform, created “standardized notes” to be traded in the interbank and commercial paper markets, to increase liquidity support for small and midsize financial institutions back in July 2019, in a move many consider as aid to the institutions following the regulatory takeover of Baoshang Bank Co. Ltd., according to the central bank regulation.