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BEIJING, June 25 (Reuters) - China will encourage banks to sell a greater variety of foreign exchange derivatives as part of a plan to steady the floundering export sector and help companies cope with currency risks.
The State Administration of Foreign Exchange, China's currency regulator, said it would lower entry barriers for companies developing foreign exchange options, and ease the path for banks to access these products.
But recognising the dangers involved in greater financial innovation, the regulator said it was also increasing oversight of the sector.
Regulation of currency forwards, swaps and options will be improved, and banks that trade foreign exchange derivatives for clients must seek approval from authorities.
It added that it might take "emergency action" to regulate banks' trading in currency derivatives to keep the foreign exchange market stable, but gave no further details.
Banks that trade such derivatives must ensure they are equally competent in managing the risks, the regulator said. And for banks where clients trade derivatives to punt on currencies, it ordered such trades to stop immediately. (Reporting by Koh Gui Qing; Editing by Clarence Fernandez)