China’s Banks Are Making Progress on Wealth Management Overhaul, Regulator Says
What’s new: China’s banking regulator said lenders are making progress toward meeting requirements under sweeping new regulations governing the management and sale of wealth management products (WMPs).
The China Banking and Insurance Regulatory Commission (CBIRC) said in a Q&A statement (link in Chinese) Monday that the outstanding value of products on the books of banks and their WMP subsidiaries based on net asset value (NAV) which don’t guarantee investors’ principal stood at 25.9 trillion yuan ($3.6 trillion) at end-April, 1.6 trillion yuan higher than at end-November.
What’s the background: China’s banks were forced to overhaul their wealth management operations and practices after new rules aimed at unifying oversight of the $16 trillion asset management industry were unveiled in November 2017 to rein in off-balance-sheet shadow banking activities that were increasingly seen as a risk to financial stability. WMPs, sold exclusively by banks, were a particular target.
Lenders were required to stipulate the returns offered by the new products based on their NAV to reflect changes in market prices, and to phase out products that did not comply with these new rules, namely principal-guaranteed WMPs.
The new regulations gave banks a transition period to make the changes ahead of an end-2020 deadline. But a CBIRC official in February said it would delay the deadline for some financial institutions after some banks complained it was hard to bring their large volume of WMPs into compliance in time.
Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.
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