Bank of China and CCB Garner Approval for Wealth Management Subsidiaries

Two of China’s big four state-owned banks have obtained approval from Beijing to launch their own wealth management subsidiaries.

In mid-November Bank of China became the first big state-owned bank to unveil plans for the launch of its own wealth management subsidiary, with CCB following suit the same month.

The China Banking and Insurance Regulatory Commission (CBIRC) announced in an official statement on Thursday that it had given its approval to both applications, just several weeks after the agency officially released regulations for the new units.

The regulations require that subsidiaries set aside reserves to cover potential losses, and have registered capital of not less than 1 billion yuan.

At least 20 Chinese banks have applied for the establishment of their own wealth management subsidiaries, with CBIRC hoping that the move helps to improve risk management and the monitoring of funds.

In April 2018 the release of new asset management regulations shook up China’s wealth management product sector by removing the “implicit guarantees” that the instruments were perceived by investors to enjoy, creating a source of moral hazard that drew the ire of regulators.

Bank wealth management products stood at 29.54 trillion yuan (USD$4.3 trillion) as of the end of 2017 according to official data.

 

 

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