China to conduct stress tests on securities and futures institutions

[BEIJING] China's stocks regulator said on Friday it will conduct stress tests on brokerages, mutual funds and commodity futures institutions to obtain a comprehensive understanding of the capital markets.

The China Securities Regulatory Commission (CSRC) will use the test results to prevent systemic risk and create a framework of contingency plans in the event of extreme market conditions, Zhang Xiaojun, a spokesman for the CSRC, told a weekly news conference in Beijing. "Risk stress-testing is an important way to enhance the effectiveness of supervision and improve management of the industry," the CSRC said in an official statement released after the conference. "It does not mean the regulators and self-regulatory organizations are predicting, or judging future development or trends in the market," it added.

China's stock market fell nearly 40 per cent in the summer before rebounding, leading to widespread concerns about how financial institutions would fare under volatile conditions in the future.

Zhang said the regulator plans to examine how firms perform under extreme conditions, such as liquidity situations, among others.

REUTERS