CBIRC Affirms Close-out Netting

On 23 November 2021 the China Banking & Insurance Regulatory Commission (the “CBIRC”) issued a circular expressly recognizing the enforceability of close-out netting arrangements entered into with financial institutions established in the People’s Republic of China (the “PRC”).  

In the accompanying Q&A, the CBIRC gave further explanations of the background policy considerations and presented its analysis of how close-out netting is supported under PRC laws and recognized by courts and relevant regulatory authorities.

We have prepared an English translation of the CBIRC’s Circular on Questions Relating to Capital Measurement Rules for Derivatives Counterparty Default Risk (the “Circular”) and the Q&A released alongside the Circular (the “Q&A”).  For ease of reference, these translations are included as appendix to this bulletin.