No.[2007]48 YJF

All CBRC offices, policy banks, state owned commercial banks, joint-stock commercial banks and the postal saving bank,
 
In order to strengthen the market risk management of banking institutions and accelerate the establishment of market risk measurement benchmark for banking institutions, the following is notified:
 
1.      Each banking institution should pay due attention to market risk management and intensify efforts on the research and application of RMB bond yield curve (hereinafter referred to as the yield curve).
 
2.      Each banking institution may use the yield curve developed either by the bank itself or by another institution to conduct market risk management, but must ensure the yield curve adopted objectively and reasonably reflecting the market changes.
 
3.      The yield curve adopted by each banking institution should be based on the comprehensive, objective and reasonable bond data sources with the influence by abnormal price changes being eliminated. 
 
4.      The model developed for the yield curves should be adapted to the variable yields patterns in the bond market and meet the requirements on smoothness and stability.
 
5.      The yield curves adopted by each banking institution should have at least one-year data available for comparison and inquiry.
 
6.      The yield curves adopted by all banking institutions should include but not be limited to treasury bonds, central bank notes, policy financial bonds and other RMB bond products.
 
7.      Starting from the first working day in October 2007, all banking institutions should adopt the inter-bank treasury bond yield curve, central bank note yield curve and policy financial bond yield curve (hereinafter referred to as the Chinabond Yield Curves), which are compiled and published by China Government Securities Depository Trust & Clearing Co. Ltd. to calculate the RMB position value on trading accounts, and compare at least once per working day the calculation results with those calculated by the self-compiled yield curves   or the curves provided by other institutions. If the discrepancies between the two calculation results exceed 1% for five (included) or more working days within one quarter, a written report with detailed and accurate explanation is required to be submitted to CBRC within the first 10 working days in the next quarter.
 
8.      Clause 7 does not apply to the banking institutions that directly use Chinabond Yield Curves to calculate RMB position value on trading accounts.
 
9.      All banking institutions are encouraged to calculate their market risk data such as value at risk (VaR) with reference to the yield curves as stated in Clause 7, thus quantifying their market risks.
 
10.     All clauses in this notice apply to foreign-funded banks in China including subsidiaries and branches. City commercial banks, rural commercial banks, rural cooperative banks, urban credit cooperatives and other banking institutions may comply with the notice based on their own realities.
 
11.     The banking institutions regulated by local supervisors should, while reporting to CBRC as required in Clause 7, also forward the report to the CBRC local offices.
 
All CBRC offices should distribute this notice to all banking institutions within their jurisdiction.