(Adds additional background)
SHANGHAI, May 26 (Reuters) - The People's Bank of China is discussing with banks the creation of a central exchange for commercial paper, the 21st Century Business Herald reported on Thursday, citing multiple anonymous industry sources.
The central bank began researching the possibility of an exchange as early as last year, the paper said, but as concerns over management of the market have mounted this year the urgency of the project has increased.
Commercial paper, sometimes known as corporate bills in China, refers to short-term obligations with maturities typically up to 270 days and sold by banks, corporations and other borrowers to investors with temporarily idle cash.
In April, sources told Reuters that the central bank is introducing new rules to the country's corporate bills market requiring banks to shift to electronic forms of issuance. The upgrade comes after recent reports of bill fraud at Agricultural Bank of China Ltd., which domestic media allege originated as a scam by two of the bank's employees.
The central bank has already held several meetings over the issue with commercial banks, the 21st Century Business Herald reported, adding that around 10 banks attended the most recent meeting on May 10.
The exchange could be launched as soon as end-2016, the paper cited its sources as saying.
Various forms of short term debt have been at the centre of several high profile bond defaults in China this year.
In late March Dongbei Special Steel Group Co Ltd defaulted on a short term bond, which was a major contributing factor to the bond sell-off in April. More recently Evergreen Holding Group defaulted on a separate short-term issue in mid May.
Until the sell-off in April, driven by fears of eroding government support for bail-outs of state-owned enterprises like Dongbei Special Steel, Chinese corporate bond issuance had growing briskly. Net issuance in the first quarter reached a record 1.3 trillion yuan ($198.30 billion).
Issuance in the past two months, however, has been far more subdued as investors have moved out of the bond market. Chinese firms scrapped or delayed at least $15 billion of new bond issuance in April according to Reuters calculations.
The central bank, when contacted by Reuters, had no immediate comment.
$1 = 6.5558 Chinese yuan renminbi Reporting By Nathaniel Taplin and Lu Jianxin; Editing by Simon Cameron-Moore and Eric Meijer