The People's Bank of China and the China Securities Regulatory Commission jointly issued a procedure Feburary 14 on the management of stock hypothecation by securities firms, allowing qualified securities firms to borrow money from commercial banks by hypothecating the stocks they hold.

The procedure regulates that the collateral security must be A shares and shares in securities investment fund listed on the domestic stock markets. The borrowers must be head offices of securities firms while the creditors are State-owned commercial banks, their authorized branches and the head office of other commercial banks.

The procedure also regulates that the outstanding term of the capital borrowed through stock hypothecation is six months at maximum. The amount of the loan should not exceed 60 percent of the market value of the stocks being hypothecated.

The procedure also includes provisions on the qualification of the borrower and the creditor, as well as detailed methods and regulations on the handling of stock hypothecation.