June 12, 2008 / 10:57 AM / 9 years ago

China regulator confirms forex margin trading ban

BEIJING, June 12 (Reuters) - China's banking regulator has ordered banks to halt foreign exchange margin trading for clients, saying it was akin to "gambling".

Allowing customers to buy and sell foreign currencies after depositing a fraction of the traded amount as security was too risky for investors, the China Banking Regulatory Commission (CBRC) said on its website on Thursday.

Eighty to 90 percent of players in foreign exchange margin trading had lost money, though banks providing the service were generally making a profit from it, the banking regulator said.

The order, dated June 6, confirmed reports from bankers last week, who said they had been told to cease the service.

Three lenders, namely the Bank of China (601988.SS), Minsheng Bank (600016.SS) and Bank of Communications (601328.SS), have been offering margin trading. They were told not to accept new clients or to let existing customers carry out new trades.

"Banks can't effectively recognise and select the right clients, nor can they fully evaluate how much risk their clients can bear," the CBRC said.

It instructed lenders to submit details of any outstanding margin trading accounts within five days.

There is no margin trading in China involving the yuan. (Reporting by Zhou Xin; Editing by Alan Wheatley)

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