China plans to stress test its brokerage industry this year to protect against potential market deterioration, according to sources in the region.
Reuters reported Wednesday that industrywide stress tests would begin this year. Selective tests of individual brokerage houses, including China International Capital Corp (CICC), had already been conducted in a pilot program earlier in the year.
Tests by the China Securities Regulatory Commission (CSRC) come as a risk management effort within the financial sector, similar to actions taken by the banking regulator over the past few years, according to unnamed sources quoted by Reuters.
Liang Jing, analyst at Guotai Junan Securities Co., who said he had no knowledge of the plan, was quoted in the report saying, “The importance of stress tests is rising as Chinese brokerages are conducting more and more innovative businesses such as index futures. Still, China’s brokerage industry won’t face systemic risks, and even in the event of a prolonged bear market, brokerages’ losses won’t have far-reaching social impact.”