New Bank Agency Regulations Raise Private Fund Entry Bar (AI Translation)

【周刊提前读】银行代销新规提高私募准入门槛 行业格局会重塑吗？

The release of new regulations governing commercial banks' sales of third-party products marks a significant development in the financial sector. Called the "Management Measures for Commercial Banks' Agency Sales Business" (the "Measures"), they have been issued by the National Financial Regulatory Administration on March 21, 2025, and will take effect on October 1, 2025. The Measures aim to provide a comprehensive and detailed regulation of banks' agency sales business, addressing product entry approvals, management of partner institutions, compliance of sales processes, and obligations during the product duration. These regulations are expected to offer better consumer rights protection[para. 1].

Banks' distribution business, historically central to their operation, has grown in importance, especially as net interest margins have narrowed, pushing banks to focus on wealth management. The Measures require banks not to solely focus on sales performance indicators; compliance, customer complaints, and internal and external inspections should also guide their performance evaluations. Banks are also urged to enhance analysis of complaint statistics to promptly identify infringements on financial consumers' rights[para. 4][para. 5].

Regarding private equity investments, the Measures introduce specific regulations. Commercial banks are allowed to distribute products that involve private equity funds and hire private equity fund managers as advisors. While some banks may find new regulations challenging, especially in admitting complex products, this could promote a more level competition field across banks, securities, and third-party sales institutions[para. 8][para. 11].

For partner institutions, the regulations emphasize management responsibilities, highlight the need for regular reviews, and establish exit mechanisms for partners failing to meet compliance standards. The regulations further outline the necessity for banks to continue their obligation throughout the product’s life instead of following a 'sell and forget' approach, ensuring clear responsibilities and stable customer service even after product dissemination[para. 6][para. 8].

Private equity fund distribution is given significant attention in the Measures as they indicate that products can be invested in private equity funds or use such managers as advisors. Banks will undergo thorough assessments when considering products linked to non-standard assets or private equity, incorporating multiple departments in this review process. The introduction of higher compliance and performance benchmarks is seen as a way to optimize the quality of product distribution over mere scale expansion[para. 17].

The Measures also detail new compliance obligations for sales activities, pushing for transparency and consistent sales practices across customer interfaces like websites and apps. This includes standardized product evaluations and limits on client risk tolerance assessments to prevent misuse or manipulation[para. 28].

For capital flows and risk management, the Measures maintain previous standards for partnering institutions but require more stringent control over fund settlements and detailed ongoing disclosure obligations. This strives to prevent fund mismanagement and improve transparency, concurrently reinforcing customer protection[para. 31][para. 33].

These regulations frame banks’ ongoing responsibilities beyond initial sales, ensuring a more structured and transparent distribution network, which is poised to enhance customer trust and mitigate post-sale disputes. In the transition, banks may encounter operational pressures, but the long-term benefits will likely manifest in elevated transparency and trust in the bank's distribution efforts[para. 38].