BEIJING, May 25 -- China's central bank has allowed brokers and city-level commercial banks to manage sales of short-term corporate bills, a move to let more financial firms tap a lucrative business currently dominated by big lenders.

    Brokerages that want to underwrite debt with a maturity of one year or less must have total assets of 5 billion yuan (US$625 million) and have posted a net profit of 400 million yuan in the latest fiscal year, the People Bank's of China said in a statement on its Website yesterday.

    Brokers also have to ensure net profit accounts for at least 8 percent of net capital to apply for the business, the statement said.

    Besides, they must have traded bonds on the interbank market for at least two years and worked as sales agents for a minimum of 10 short-term debt sales, it said.

    City commercial lenders have to maintain assets of at least 40 billion yuan and a capital-adequacy ratio of 10 percent to underwrite corporate bills, the central bank said.

    They must also have arranged a combined trading value of 500 billion yuan in bonds in the latest year, it said.

    Boost debt market

    China initiated a program last May to let enterprises issue short-term bonds to boost their working capital as part of regulatory efforts to bolster the debt market and extend the business scope for financial firms.

    Such debt, sold to institutional investors, usually brings better returns for investors than bank deposits while reducing the borrowing costs of issuers.

    Chinese companies had sold nearly 200 billion yuan in such short-term debt by the end of April, underwritten by 13 national-level commercial banks, including the big four lenders.

    A total of 13 brokers had only been allowed to act as sales agents.

    Underwriters can charge nearly 0.4 percent of funds collected through bond sales as commissions while distribution agents can only collect as much as 0.15 percent.

    Media reports have said Chinese companies may sell an additional 250 billion yuan in short-term bills this year.

    "The move will offer brokerages and city banks a new cash cow as the government bids to boost the debt market," said Li Zhi, of Hualin Securities Co. "The capital and profit requirements are part of efforts to contain risks for the relatively new business."

    (Source: Shanghai Daily)