The China Banking Regulatory Commission (CBRC) authorised Credit Suisse First Boston (CSFB) to launch a financial derivatives business in China last week, reports RiskNews’ sister publication, FX Week .CSFB joins a growing number of banks that have received the go-ahead under a new legal framework on derivatives introduced in March. Other banks that got the green light include Citigroup, China Minsheng Bank, Mizuho Bank, Standard Chartered and the Bank of Communications, while HSBC and Deutsche Bank are awaiting approval.
The derivatives framework enables banks to trade derivatives on their own accounts for profit – previously they were only allowed to use them to hedge. Banks may also now target corporate customers. Previously, they could only offer them to other banks.
As the renminbi is not convertible on the capital account, banks that receive approval are limited to foreign currency-denominated derivatives products. They must also comply with existing regulations from other financial regulatory bodies such as the China Securities Regulatory Commission.
A spokesperson for CSFB declined to comment on what products the bank will sell, saying it has submitted a proposal to the CBRC. "We now get in-principle approval from the CBRC to engage in derivatives but we have to re-submit the plan for the product we intend to sell to Chinese clients, to the CBRC," said the spokesperson.
Under the rules, the bank can engage in interest rates, foreign exchange and credit derivatives products.
Paul Calello, chairman and chief executive officer for the Asia-Pacific at CSFB, said he envisaged demand for such products among government agencies, large domestic institutions, foreign and domestic corporates, and institutional investors.
CSFB will conduct its derivatives business in China through its Shanghai bank branch. The bank received approval from the People's Bank of China to engage in renminbi business in 1998.
More on Risk Management
ABSTRACT This paper shows that traditional measures of bond systematic risk based on unadjusted past returns have very large downward biases. After we develop an improved method for calculating the market...
ABSTRACT This paper studies the approximation of extreme quantiles of random sums of heavy-tailed random variables, or, more specifically, subexponential random variables. A key application of this approximation...
ABSTRACT Because publicly available measures of deposit runoff risk are scarce, regulators' models to measure interest rate risk in the banking book are based on very coarse assumptions about the allocation...
ABSTRACT This paper analyzes and quantifies the idea of model risk in the environment of internal model building. We define various types of model risk including estimation risk, model risk in distribution...
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.