The People's Bank of China has introduced a system that allows banks to trade loans through the interbank market. The secondary-loan market will help banks increase capital and reduce risks. It is being introduced as Chinese banks face tougher regulatory requirements and in the wake of explosive loan growth, driven by economic-stimulus measures. China also announced recently it would soon allow credit default swaps, but limit the amount of leverage used in the swaps and not allow swaps on high-risk assets such as subprime mortgages.
Published in Brief: