BEIJING, July 14 (Greenpost) – China has put local government bonds into the qualified collaterals pool for banks’ term deposits of Treasury cash on June 30, according to a circular released by the Ministry of Finance and the central bank Tuesday.
As the document says, bonds issued or to be issued by any Chinese local governments can be taken by banks as collaterals for their term deposits of Treasury cash from both the central government and local governments.
However, Chinese banks are required to pledge an amount of local government bonds whose par value is equal to 115 percent of the value of their Treasury cash term deposits to rein in risks.
Analysts held that Chinese regulators took the move to increase the relatively poor liquidity of local government bonds, issues of which was set to boom to at least 1.6 trillion yuan in 2015.
In future, MOF and the Chinese central bank will adjust the scale and proportion of collaterals for products to manage Treasury cash to guarantee safety of Treasury cash. Enditem
Editor Xuefei Chen Axelsson