Thursday, March 27, 2008

Chinese banks get nod to trade gold futures

Chinese commercial banks will be allowed to trade gold futures in the domestic market, under the guidelines issued by the China Banking Regulatory Commission (CBRC).

Chinese banks can apply for a trading permit, provided that they meet certain requirements, such as having capital adequacy ratio of over 8% and possessing the qualifications to trade derivative products. The standards are designed to guarantee the safety in the operations.

China gold futures trading started in January, but domestic banks were forbidden to trade by the CBRC.

Hu Yuyue, an expert with Beijing Technology and Business University, said that the move would make the local banks more competitive against overseas banks, as financial derivatives are supposed to be the largest revenue sources for leading banks. He also noted that the commercial banks can offer more liquidity and stability to the market, as they hold huge capital.

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