The China Banking Regulatory Commission (CBRC) has proposed to let banks use credit derivatives to hedge their risky assets, The Wall Street Journal reports. The banking regulator has circulated a set of draft rules seeking comment from financial institutions.
CBRC has also proposed to allow lenders offset their credit-derivative positions against their assets, reducing the total risk they carry on their books. The CBRC draft rules will also widen the appeal of contracts by specifying that a debt restructuring can trigger claims for compensation by the buyer of protection.
Click here for the story from The Wall Street Journal.