2381/39155
Mark Hsiao
Mark
Hsiao
OTC Derivatives Regulation in China: how far across the river?
University of Leicester
2017
IR content
2017-01-16 15:35:11
Journal contribution
https://figshare.le.ac.uk/articles/journal_contribution/OTC_Derivatives_Regulation_in_China_how_far_across_the_river_/10196516
In 2011, China revised its prudential regulation on the derivatives activities of financial
institutions as a result of the global financial crisis. This paper considers how prudential
regulation, supervision of conduct and requirements that limit risk-taking are used to
achieve policy objectives in the context of regulating derivatives in China. This is
particularly pertinent in the case of China, where financial institutions were formerly
state-owned enterprises. These objectives are closely related to defining the legitimate
purpose of contracts which are used to hedge default risk of credit assets owned by
financial institutions. The paper also considers the legal aspects of the executory contract
arising from the legal transplant of the ISDA Master Agreement 2002 into China in the
form of NAFMII Documents, and the way in which the Contract Law 1999 (CL) and the
Enterprise Bankruptcy Law 2006 (EBL) interact to offer a solution to the issue. Finally,
the paper offers an explanation of existing Chinese central counterparty (CCP) and
finality orders in clearing and settlement systems for possible alignment with
international recommendations on OTC derivatives regulation at Pittsburgh in 2009.