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July 24, 2018

China tightens grip on wealth market

The China Banking and Insurance Regulatory Commission (CBIRC) has released new draft rules on commercial banks’ wealth management businesses in an effort to mitigate systemic risks.

The new rules state that wealth management products (WMPs) should be managed on the basis of their net value.

New China wealth management rules : what are they?

Under the new rules, funds invested in one WMP should not be more than 20% of the plan’s net asset value.

Also, asset management plans managed by one financial institution are barred from investing more than 20% of the assets in one WMP.

The rules also restrict banks from investing 4% of their assets or more than 35% of total WMPs in a non-standard project.

In addition, the minimum amount of client subscription to single public WMPs has been reduced to RMB10,000 from the previous requirement of RMB50,000.

Banks are also required to standardise fund pools management to prevent risks of shadow banking as well as enhance liquidity management.

Approval still needed

The rules, if approved, are expected to be implemented in 2021.

The new rules supplement the People’s Bank of China’s guidelines to raise the bar on the supervision of the country’s $15 trillion asset management sector.

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