The People's Bank of China (PBC), the country's central bank, issued regulations Wednesday on the issuance of financial bonds in China's inter-bank bond market, the bank said.

The regulations will increase the balance capability and direct financing proportions of financial institutions by boosting the issuance of financial bonds in China, the bank said.

Financial bonds are negotiable bills issued in the inter-bank bond market by financial institutions in China which should be paid with interest when repaying the principal. The institutions include policy-lending banks, commercial banks and finance companies of corporations.

In reference to international standards and risk supervision norms of China Banking Regulatory Commission, the regulations made clear provisions on the conditions for commercial banks' and finance companies' issuance of bonds. According to the regulations, commercial banks issuing bonds must have a core capital adequacy ratio not less than four percent while the ratio for finance companies cannot be less than 10 percent.

The regulations will provide general rules on financial bonds issuance in China's inter-bank market, said a senior official with the PBC.

The management of assets and liabilities is generally weak in Chinese deposit financial institutions such as commercial banks, which lack effective liability tools which restrict their operation and risk assuming capabilities.

Issuing financial bonds could supply a sustainable and stable capital source for commercial banks in China to change their current liability state with deposits taking a major part and defusing financial risks, said the official.

On the other hand, by issuing financial bonds through finance companies, enterprises and corporations could find a way to expand their direct financing channel and to optimize the structure of their financial assets, he said.

He said that in China's bond market, where treasury bonds and policy bonds take an absolute high proportion, issuing financial bonds could be helpful for enrich the varieties of credits by increasing the categories of investment products.

The new regulations will take effect on June 1.