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	CIRCULAR OF CHINA INSURANCE REGULATORY COMMISSION ON INTENSIFYING THE RISK MANAGEMENT OF SHORT-TERM FINANCING BONDS

	(July 31, 2006 No. 82 [2006] of China Insurance Regulatory Commission)


SUBJECT : RISK MANAGEMENT; SHORT-TERM FINANCING BONDS
ISSUING DEPARTMENT : CHINA INSURANCE REGULATORY COMMISSION
ISSUE DATE : 07/31/2006
IMPLEMENT DATE : 07/31/2006
LENGTH : 383 words
TEXT :

In recent days, where a certain company is involved in the rule-breaking loaning of a huge amount of capital, which may trigger the risk of short-term financing bond repayment. Upon investigation, it is found that some few insurance companies are holding the short-term financing bonds of the said company. In order to intensify the risk management of short-term financing bonds and dissolve the credit risks of the different varieties of trade products, we hereby notify the relevant issues as follows:

1. All insurance institutions shall immediately investigate into the quantity of high-risk short-term financing bonds and find out whether or not there is any debtor-creditor relationship between themselves and the said high-risk company. An insurance institution that holds any of the high-risk short-term financing bonds or has any debtor-creditor relationship with the high-risk company shall adopt prompt and effective measures and formulate a reserve plan of risk settlement so as to avoid any asset loss.

2. All insurance institutions shall intensify its internal credit appraisal system and incessantly improve the credit appraisal mechanism. We should attach great importance to all the rating institutions whose rated bonds suffer credit risks, re-examine their appraisal capability of credit rating, employ the general rating standards as well-accepted by the market to examine all the securities products as appraised by the relevant rating institutions, and adjust the internal rating as soon as possible.

3. All insurance institutions shall conduct an overall appraisal on the credit risks in the short-term financing bonds that they have invested in, make an in-depth analysis on the market risks, sort out the securities for which the relevant appraisal is distorted and the credit rating is falsely high, further optimize the investment credit structure and continuously follow up the market risk so as to react quickly and adopt proper measures.

4. All insurance companies shall make this event as a reference and do a good job in the work of risk prevention. At the present time, an insurance institution that holds any of the high-risk short-term financing bonds or has any debtor-creditor relationship with the mentioned high-risk company shall, before August 4, 2006, report the relevant investment, including the decision-making of investment, the internal credit rating as well as the reserve plan of emergencies, to the Capital Supervision Department of China Insurance Regulatory Commission.