The Industrial and Commercial Bank of China (ICBC) announced on Friday that it will impose some restrictions on retail firms engaged in forex and commodities trading. According to Reuters, the maneuver is set to begin from October 17, when it will suspend the opening of new accounts for the “Forex Business Account”.
The bank commented, “The risks are high these days in the global foreign exchange and commodity markets, so please pay attention to controlling the risks.” Furthermore, existing clients will be prevented from opening new trading positions in companies where individuals can trade forex against the Chinese yuan for speculative or hedging purposes.
Scrutiny of the domestic forex industry has increased dramatically. Regulatory regulations in China are poised to expand into the cryptocurrency markets and the forex industry. Finance Magnates recently reported that local regulators are pressuring banks to pursue deals of a smaller scale, with the aim of curbing speculation. In addition, Chinese brokers have stopped publishing forex-related forecasts amid regulatory pressures on their backs as interbank supervision has increased dramatically in the country.
TeleTrade: Markets want a multibillion dollar package, not just an increase in the debt ceiling. Skip to article >>
Chinese scrutiny of the foreign exchange industry
Also, the gambit suggests that the Chinese government is looking to discourage commodity price increases across the board amid US policymakers’ preparations to withdraw or scale back monetary stimulus. Over the past few months, both the Industrial and Commercial Bank of China and other Chinese banks have announced the closure of forex related companies that have enabled investors to bet on currency pairs other than the yuan.
However, regulators are actively reminding banks that their role as authorities is to smooth out market volatility “without pushing the yuan to either side.” “(Now) you get calls from regulators if you trade too much,” a source told Reuters last week. So far, the People’s Bank of China (PBoC) has pumped a net 750 billion yuan ($116 billion) into the national banking system since September amid fears of a debt crisis sparked by Evergrande Group.