Beijing banks urged not to force liquidation of pledged shares

SHANGHAI: China’s banking and insurance regulator has urged lenders in Beijing to avoid forced liquidation of pledged shares, as part of efforts to help stabilise the country’s stock market, Chinese financial magazine Yicai reported, citing sources.

The Beijing branch of the China Banking and Insurance Regulatory Commission (CBIRC) said unrealised losses or lending risks associated with shares that banks hold as collateral against loans will not be part of regulatory inspections, according to Yicai.

CBIRC has also encouraged banks to further increase lending to listed companies facing temporary difficulties, Yicai reported.

CBIRC could not immediately be reached outside normal business hours.

In the past week, China has unveiled a series of measures to ease liquidity pressure at small and medium-sized enterprises struggling in a slowing economy clouded by the broadening Sino-US trade war.

Underscoring the liquidity stress, about US$620bil of Chinese shares have been pledged for loans, putting companies under pressure as stock markets tumble and the prospect of forced liquidation rises.

According to Yicai, lenders in Beijing have been urged to set up a dynamic mechanism to monitor risks of pledged shares and to defuse risks in a stable and orderly manner.