Beijing Has Second Thoughts About Asset Management Regulations

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In the wake of concerns that its new asset management guidelines could imperil financial stability, the China Banking Regulatory Commission has announced that it will give further consideration to the impact of the regulations prior to implementation.

On 17 November the People’s Bank of China issued the draft version of the “Guidance Opinions Concerning Standardisation of Asset Management Operations by Financial Institutions (Draft for Solicitation of Opinions)” (关于规范金融机构资产管理业务的指导意见) in conjunction with several other central government authorities.

China hopes to reduce the risk of systemic financial stability by removing the “implicit guarantees” that many financial products are perceived to enjoy, and in particular the wealth management products that smaller banks depend upon to obtain retail funds.

Multiple sources have since expressed concern that the new regulations could hamper China’s financial sector, by triggering a rash of early redemptions to shore up liquidity, as well as impeding the ability of smaller lenders to access funds.

Reuters has reported that the concerns are strong enough within the sector itself to have prompted ten executives from Chinese joint-stock banks to take their concerns to regulators themselves, while other observers such as  Issaku Harada and Yusho Cho of the Nikkei Review argue that the guidelines may never be enforced at all.

Chinese regulators have since sought to assuage such concerns by stating that they will give greater consideration to their impacts prior to implementation.

“The new regulations will fully consider the impact on banks and markets before being finalised,” said Liu Zhiqing, deputy director general of CBRC’s prudential regulation bureau, according to the state-owned Xinhua News Agency.

“We are seeking comments now, hoping all parties will make suggestions and come up with good solutions that will be implemented smoothly.”

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