Shanghai adds new collateral management infrastructure

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Shanghai. Photo: iStock

The Central Government Bond Registration and Settlement Co. Ltd. has set up its headquarter as well as its debt guarantee business center in Shanghai on Monday, Yicai.com reported.

Collateral Management Infrastructures have become the battleground for the world’s major international financial centers. Thus, the settlement will help to upgrade Shanghai’s financial status.

Preventing systematic risks from the macro perspective, while establishing a sound guarantee mechanism will help maintain order and stability in the market from the micro perspective.

As of 2016, the balance of collateral management reached 12 trillion yuan (US$1.81 trillion), moving its business scale to the top of the world.

While China’s collateral business is still at the starting point, Zhang Ting, the director of the company’s collateral business center, pointed out that most of the businesses involved in collateral management have a low pledge rate, resulting in a waste of quality assets. 

In addition, the scope of collateral is still relatively narrow. At present, most of the businesses only accept interest rate bonds, government bonds and policy financial bonds as collateral. Compared with 44 trillion custody bonds, pledged bonds currently used for collateral make up just 12 trillion yuan, accounting for only 27%.

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