China to ease leverage limits for top securities firms to boost investment banks

China will moderately relax leverage limits for high-performing securities firms as part of accelerated efforts to nurture internationally competitive investment banks and advance the high-quality development of its capital markets, the country's top securities regulator said over the weekend.

Wu Qing, chairman of the China Securities Regulatory Commission, said the commission will ease certain constraints on high-quality securities firms, including optimizing risk-control indicators and moderately "expanding the room for (utilizing) capital and easing leverage limits to improve capital efficiency".

The move, according to analysts, marks the commission's clearest signal yet that it may allow high-performing securities firms to take on more leverage to enhance balance-sheet flexibility for better investment banking functions.

Wu outlined, in a speech delivered at a conference of the Securities Association of China, that differentiated supervision will be explored for small and medium-sized securities firms and foreign investment banks, while firms with compliance issues will face stricter oversight.

He added that China aims to nurture a number of top-tier investment banks with "significant international influence" during the 15th Five-Year Plan period (2026-30) by promoting resource integration and mergers and acquisitions.

Wu stressed that world-class investment banks are not the exclusive domain of large institutions. Smaller firms, he said, should focus on niche sectors, specific client groups and key regional markets to develop into specialized, high-quality boutique investment banks.

A report from China Securities noted that Wu's remark has, for the first time, clearly indicated the reform toward easing leverage limits for quality securities firms, a key move that will help improve market liquidity, increase profitability, and support business growth in margin financing, derivatives and proprietary trading.

According to the report, the average leverage ratio of 43 Chinese listed brokers stood at 3.47 times as of the first three quarters of 2025 (excluding client funds), with leading firms approaching 5 times — far below the more than 10 times typical leverage seen at global investment banks such as Goldman Sachs and Morgan Stanley.