China’s central bank is considering setting up a centralized exchange platform with commercial banks for bill trading after cases of fraud and misconduct, the 21st Century Business Herald reported, citing unidentified industry participants.
The People’s Bank of China may take the leading role in the exchange after discussions with about 10 banks to gauge their interest in buying stakes in the platform, the newspaper said on Thursday. The venture may have a registered capital of 1 billion yuan ($152 million) and start before the end of this year, according to the report.
Bills financing, also known as bankers’ acceptance, has been rising in popularity in part because it gives banks a low-risk way to circumvent loan quotas. The market, which doubled in the two years through 2015 to $700 billion, has been prone to fraud because 80 percent of transactions are recorded on paper rather than electronically.
Bank of Tianjin Co. in April reported a 786 million yuan “risk incident” related to its bill-financing business. China Citic Bank Corp. in January uncovered a 969 million yuan incident, while bigger rival Agricultural Bank of China Ltd. earlier revealed a 3.9 billion yuan bill fraud at its Beijing branch.
In April, the central bank and the banking regulator required banks to review their bill businesses and step up risk controls.
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