Regulator drafts rules on liquidity support for security firms

China’s securities regulator is soliciting public opinions over a rule allowing a state fund to bail out securities companies that “face significant liquidity risk,” according to an online note from the China Securities Regulatory Commission.

The rule also regulates the methods and sources of liquidity support securities firms can seek — ranging from asset sales to seeking assistance from shareholders or other brokerages.

The regulation is under public review until August 5, according to the note. It didn’t disclose when the rule would be implemented.

In late June, the People’s Bank of China allowed brokerages to issue more debt as officials sought to ease a funding strain spurred by the government seizure of a bank. That month the central bank and the securities regulator called on major banks and brokerages to increase financing support to smaller brokers, according to people familiar with the matter. Bloomberg

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