Probes were announced this week against at least three major Chinese banks amid stepped-up efforts to address long-standing problems in the world’s second-largest bond market.
Disclosures by the National Association of Financial Market Institutional Investors, an entity governed by China’s central bank that oversees interbank bond sales, involved China Construction Bank Corp., Export-Import Bank of China and China Minsheng Bank Corp.
Bloomberg News reported last month that NAFMII was asking underwriters to review problematic practices in the primary corporate-debt market, according to people familiar with the matter. Issues under scrutiny include the large price gaps that sometimes exist between the primary and secondary markets, as well as the practice of charging underwriting fees below market rates, they said.
NAFMII said in April that Industrial and Commercial Bank of China Ltd., the country’s largest lender, was being probed.
For years, Chinese authorities have sought to improve the oversight of the debt market by clamping down on practices that unfairly skew prices, inflate demand and mislead investors. Greater governance may help boost the confidence of overseas investors, who account for less than 1% of the nation’s $2.9 trillion interbank nonfinancial corporate-bond market.
Four banks have been asked to carry out so-called rectifications, NAFMII said this week, as the firms provided convenient conditions for some institutions to illegally hold bonds on behalf of others or conducted related transactions.
