China Banking Regulatory Commission has approved the Bank of Shanghai to be engaged in financial derivatives deals, making it the first Chinese city commercial bank to get the nod.

The provisional regulations on derivatives business was issued by the CBRC on Feb.4, 2004 and took effect as of March 1 the same year. Partly based on international norms, the rules specify the eligibility of both domestic and foreign banks for their derivatives transactions.

The Bank of Shanghai has mobilized its resources to research on the derivative products and is well prepared for the business in terms of risk management, personnel, support system, implementation program and mechanism construction.

Analysts think derivative products will be widely used to help clients preserve value and offset risks as the further flexibility of China's interest rate and exchange rates in the long-run on one hand. It will also serve as an effective tool for banks which need to manage its own balance sheet well, keep operation risk off, and improve profitability and competitiveness.

By People's Daily Online