Regulators tighten rules for bond trading to curb risks

Ban on informal 'drawer agreements' expected to reduce leverage ratio

China's financial regulators have tightened rules for bond trading, a move that may exert short-term selling pressure on the bond market but will help reduce excessive leverage and curb risks in the country's financial system, analysts said.

The People's Bank of China has issued a regulation in collaboration with the country's banking, securities and insurance regulators that banned financial institutions from engaging in the so-called drawer agreements, a kind of under-the-table deal that enables them to dodge regulatory requirements when it comes to using borrowed money to invest in bonds.