The National Association of Financial Market Institutional Investors (NAFMII) held business symposium on credit risk mitigation (CRM) instrument in Beijing on December 10, 2010. The meeting was attended by leaders from the General Office, the Legal Affairs Office and the Policy Research Department of the State Council, the People’s Supreme Court, the People’s Bank of China, China Securities Regulatory Office, China Insurance Regulatory Office, the State-owned Assets Supervision and Administration Commission and other relevant authorities. In addition, related managers from financial institutions such as Industrial and Commercial Bank of China, CITIC Securities, China Life Insurance Company Limited as well as enterprises such as Sinopec, State Grid Corporation of China also attend the symposium. The meeting was chaired by Shi Wenchao, Executive Vice President and Secretary-General of NAFMII.

Shi Wenchao addressed the meeting and pointed out that the launch of CRM as an underlying credit derivative has played an important role in carrying out the policy of CPC Central Committee and the State Council to “actively expand direct financing”, satisfying the urgent demand of market players for effective credit risk management, effectively preventing the system risk and promoting the steady development of overall economy and financial markets. After the CRM pilot business guideline was published on October 29, 2010, the market players have shown great enthusiasm for the pilot business. So far, 27 CRM dealers, 14 CRM core dealers and 23 CRMW creation institutions have completed the registration. Meanwhile, 11 dealers have stricken 23 CRMA deals and the nominal principal amounted to RMB1.99 billion. In addition, 3 creation institutions successfully created 4 CRMWs with the nominal principal totaled RMB480 million on November 23.

Experts exchanged their experience obtained from the CRM pilot project, and heatedly discussed the practice, constraints, trend and other topics regarding the CRM business. The experts fully recognized the positive functions of CRM instruments in satisfying the actual market demand and enhancing the ability of financial markets to prevent risks. They also offered their opinions on diversifying the types of market players, defining the capital mitigation function of CRM, promoting the application of hedge accounting and improving the taxation and legal systems.

After hearing the report and experience shared on the CRM pilot business, leaders from competent departments acknowledged NAFMII’s initiative to play the role as a self-regulatory organization, and organize market members to engage in product innovation, and extolled the launch of CRM.

All the leaders and experts unanimously agreed that CRM is an independent innovative product launched by bringing together the wisdom of market participants based on the principle of “serving actual demand, pursuing simplicity and transparency and controlling leverage ratio”. As such, CRM instrument has different characteristics from CDS and other products prevailing in the international market, and is an important contribution that China has made to the development of the world credit derivative market. Moreover, with the vigorous support from competent authorities and the concerted efforts of market members, the development of CRM market will definitely be standardized, healthy and sustainable.

The CRM symposium provided a platform for relevant government authorities to keep informed of the CRM pilot business, for market members to exchange their experience, and for in-depth discussion on the development of China’s CRM market. The symposium was a complete success.