China’s Banking and Insurance Regulatory Commission (CBIRC) has issued new rules to allow asset investment companies (AICs) to conduct debt-to-equity swaps more quickly and efficiently, Caixin reports.
AICs are government-run subsidiaries of commercial banks set up with the central aim of carrying out Beijing’s debt-to-equity swap program, which will allow banks to absorb the debt of highly-leveraged firms in exchange for stock.
The regulations, effective immediately, will lower the amount of funds the AICs need to set aside in the case of debt defaults, instead allowing banks to take non-controlling stakes in the companies and confer greater flexibility to conduct the swaps.
The AICs will also have the freedom to sell debt that cannot be converted to equity, and banks will be able to sell wealth management products to invest in the swaps of other lenders.