China watchdog eyes new derivative trade rules

China's banking regulator is considering tighter rules on domestic banks' derivative operations after some companies and lenders suffered heavy losses last year, local media said Tuesday.

The China Banking Regulatory Commission is studying plans to discourage lenders from trading complicated overseas derivative products, the China Business News reported, citing unnamed sources.

It may also ban domestic banks from taking part in complex derivatives transactions between domestic companies and overseas institutions, one of the sources told the newspaper.

A number of domestic companies and institutions incurred heavy losses from derivative products when the financial crisis kicked in last year, the report said, without naming them specifically.

The banking regulator would not immediately comment on the report when contacted by AFP.

Earlier this year the state-owned Assets Supervision and Administration Commission ordered state firms to reconsider their overseas derivative investments and leave high-risk contracts after some suffered massive losses.

Investment conglomerate Citic Pacific said in December its realised and potential losses from unauthorised forex bets had risen to 18.6 billion Hong Kong dollars (2.4 billion US).

And China Eastern Airlines Corp, the country's third-largest carrier by fleet size, reported a 2008 loss of about 6.2 billion yuan (910 million dollars) due to fuel hedging contracts.