The practice of debt-to-equity swap may apply to the handling of institutional credits derived from asset management on trust, treasury bond repurchase and the purchase of other investment type products over financial institutions in trouble, the China Securities Journal quoted an informed source as saying.

But government policies on such a practice have not come out. Usually, the proportion of repayment to institutional investors in a financial institution when the said financial institution goes bankrupt has been low.

This compared with full amount taking over of small-amounts (less than 100,000 yuan) saving deposits and securities trading deposits owed to individual investors, and taking over 90 percent if the amount exceeds 100,000 yuan. The scheme has earlier been implemented in handling non-performing credit assets of banks, in which the non-performing credits are converted into equities of the borrowers.

Source: Shenzhen Daily-Agencies