Will New Rules for Bank Wealth Management Subsidiaries Pave Way for “Universal Licenses?”

Observers says new rules governing the wealth management subsidiaries of Chinese banks serve to dramatically expand the permitted investment scope of China’s 22 trillion yuan bank wealth management market.

The China Banking and Insurance Regulatory Commission (CBIRC) officially launched the “Commercial Bank Wealth Management Subsidiary Company Administrative Measures” (商业银行理财子公司管理办法) on 2 December, following the solicitation of opinions from industry during  the period from 19 October to 18 November.

The Measures stipulate that “bank wealth management subsidiary wealth management products are not permitted to make direct investments in credit assets, are not permitted to make direct or indirect investments in the credit assets and related usufructs of key shareholders, are not permitted to make direct or indirect investments in the secondary asset-backed securities issued by key shareholders, and the wealth management products issued to non-institutional investors are not permitted to direct or indirect investments in non-performing asset usufructs.”

Writing for Jiemian.com, Hao Xinyao (郝昕瑶) says that these provisions place only loose restrictions on investments made by bank WMP’s, and essentially provide lenders with carte blanche for the allocation of funds. 

“This means that aside from bank wealth management subsidiaries can become involve din any investment targets aside from [the above.]

“The operating licenses for bank wealth management subsidiaries will become ‘universal licenses’ for the wealth management market.”

According to Jiemian at least 18 Chinese banks have announced plans to establish wealth management subsidiaries, including five big state-owned banks, eight joint-stock banks and five municipal commercial banks.

 

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