China publishes rules to regulate trading of bonds after default

SHANGHAI, Dec 31 (Reuters) - China’s central bank published rules on Tuesday that regulate the transfer of bonds after default, part of efforts to improve the mechanism to deal with rising corporate delinquencies.

The People’s Bank of China (PBOC) said in a statement on its website that bonds whose issuers fail to meet repayment obligations can change hands via the interbank market or through trustee and settlement agencies.

Issuers of such bonds should make timely, complete and accurate disclosure on the securities, while the bonds’ underwriters should hold bondholder meetings in a timely manner, and meet other obligations.

Investors trading such bonds should be fully aware of potential risks, and must not conduct illegal transactions that involve fraud or insider trading, the PBOC said.

Last Friday, PBOC published draft rules on regulating corporate bond default disposal, saying it would diversify market-based default disposal methods and strengthen punishment for malpractices.

China’s corporate defaults have risen to record levels this year as the country’s economy has slowed to its weakest pace in three decades. (Reporting by Samuel Shen and Andrew Galbraith; Editing by Catherine Evans)