China’s central bank and foreign exchange regulator issued new rules at the weekend that will prohibit domestic banks from using overseas loans to invest in securities or “speculative deals”.
The rules will take effect from March 1, according to a notice on the People’s Bank of China (PBoC) website, to “effectively prevent risks”.
The rules “will establish a policy framework for banks’ overseas loans integrating domestic and foreign currencies, bring banks’ offshore yuan and foreign exchange loan business into unified management”, the notice said.
They would facilitate the use of yuan to obtain overseas loans, the bank said, and “incorporate cross-border capital flows related to the loans into the macro-prudential management policy framework”.
The PBoC and the State Administration of Foreign Exchange jointly issued the “Notice on Matters Concerning the Overseas Loan Business of Banking Financial Institutions”.
- George Russell
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