Caixin
Feb 07, 2020 06:06 AM
FINANCE

Exclusive: China’s Banks May Get Another Year on Asset Management Rules

China’s coronavirus outbreak adds uncertainty to the implementation of sweeping new asset management rules. Photo: VCG
China’s coronavirus outbreak adds uncertainty to the implementation of sweeping new asset management rules. Photo: VCG

China’s banking regulator may give financial institutions another year to comply with sweeping new asset management rules issued in 2018 and set to take effect in December 2020, Caixin learned from several sources close to the regulatory commission.

With little progress by banks in overhauling their wealth management products (WMPs), regulators have solicited opinions from several big state-owned banks and prosed extending a transition period for compliance with the new rules to the end of 2021.

The proposal was discussed before the coronavirus outbreak, which has infected more than 28,000 people and killed more than 560. As the impact of the epidemic on the economy is still hard to predict, the possibility of a further extension of the transition period cannot be ruled out.

The China Banking and Insurance Regulatory Commission (CBIRC) has not responded to a Caixin request for comment.

Financial institutions that find it hard to bring their large volume of asset management products into compliance by the original date may receive “appropriate” grace periods, Cao Yu, vice chairman of the CBIRC said Saturday. He made the comments at a briefing where financial regulators announced steps to support the economy in the face of the coronavirus outbreak.

Cao’s statement was widely seen as the first explicit regulatory response on potential extensions to the compliance deadline. The banking watchdog hinted last month of a potential extension, but it did not make any formal announcement.

China’s overhaul of its $16 trillion asset management industry is part of a broader Beijing-led campaign to rein in financial risks and control leverage in the financial system that many warned was at dangerous levels. The revamped asset management rules were particularly aimed at curbing off-balance sheet “shadow banking” activities that were increasingly seen as a threat to financial stability.

Banks find it difficult to deal with their massive nonstandard credit assets with long maturities. Under the new framework, financial institutions need to offload such nonstandard assets or return them to their balance sheets by reasonably adjusting certain measurements.

Since the release of the new rules, however, banks’ nonstandard asset ratios largely stayed put. Some banks have started to offload such assets, while others chose to wait until the end of 2020 for possible new relaxation.

Wu Xiaomeng and Timmy Shen contributed to this report.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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