Four credit risk mitigation warranties (CRMWs) issued by three CRMW institutions – China Bond Insurance Co., Ltd., Bank of Communications and China Minsheng Banking Co., Ltd. – started trading and circulating formally in the national interbank bonds market today (November 24), after the completion of bookkeeping and filing on November 22, and the completion of subscription, payment and warranty registration on November 23. This marks the formal launch of the first CRMWs in China.

The total notional value of the four CRMWs is RMB480 million, which:

The underlying entity of CRMW I of China Bonds Insurance Co., Ltd. in 2010 (warranty code 021001001) is China Unicom and the underlying debt is 10 Unicom MTN2. The actual total nominal principal is RMB130 million, calculated price of the warranty is RMB0.87/RMB100 face value, and the protection period is 1,032 days.

The underlying entity of CRMW II of China Bonds Insurance Co., Ltd. in 2010 (warranty code 021001002) is China Unicom and the underlying debt is 10 Unicom CP02.The actual total nominal principal is RMB100 million, the calculated price of warranty is RMB0.3/RMB100 face value, and the protection period is 301 days.

The underlying entity of CRMW I of Bank of Communications in 2010 (warranty code 021002001) is TCL Group and the underlying debt is 10 TCL Group CP01The actual total nominal principal is RMB50 million, the calculated price of the warranty is RMB0.35/RMB100 face value, and the protection period is 9 months.

The underlying entity of CRMW I of Bank of China Minsheng Banking Co., Ltd. (warranty code 021003001) is Yunnan Copper Industry (Group) Co., Ltd., and the underlying debt is 10 Yunnan Copper CP01. The actual total nominal principal is RMB200 million, the calculated price of the warranty is RMB0.23/RMB100 face value, and the maturity date is October 20, 2011.

The CRMW is launched by NAFMII after organizing market players to conduct thorough research and adequate demonstrations. As the fruit of autonomous innovation, the CRMW features tradability, one-to-multiple trading, standardization and low leverage ratio, and upholds the principle of “serving actual demand, pursuing simplicity and transparency and, controlling leverage ratio”. It is a China-created innovation to the world’s credit derivative market. The successful launch of the credit risk mitigation instruments, including the credit risk mitigation agreement (CRMA) and the credit risk mitigation warranty (CRMW), helps enrich the credit risk management options available to investors, enhance the credit risk sharing mechanism in the bond market, carries the practical significance to strengthening the competitiveness and attraction of China’s financial market, deepening China’s financial market and safeguarding the financial stability, and marks China’s financial market, in particular the financial derivative market, has stepped into a new area.