The Chinese central bank plans to launch new asset management regulations for the standardisation and recognition of debt-based assets.
On 12 October the People’s Bank of China (PBOC) released the draft version of the “Rules for the Recognition of Standardised Debt-based Assets” (标准化债权类资产认定规则（征求意见稿）) for the solicitation of opinions.
The new rules serve as an adjunct to the “Guidance Opinions Concerning Standardisation of Financial Institution Asset Management Operations” (关于规范金融机构资产管理业务的指导意见) which came into effect in early 2018.
According to a PBOC spokesperson the new recognition rules will clarify the distinction between standard and non-standard debt-based assets, as well as set recognition standards and regulatory arrangements.
The recognition rules will “provide clear recognition standards for standardised debt-based assets and raise the inclusion and accommodation of the bond market.”
Under the rules standardised debt-based assets are primarily considered to be fixed-income securities such as bonds and asset-backed securities.
Any other debt-based assets will need to satisfy five conditions in order to be recognised, including:
- Divisibility;
- Tradability;
- Full information disclosure;
- Centralised registration;
- Independent trusteeship.
Any standardised debt-based assets will need to be centrally registered and held by bond market registration and trusteeship entities as approved of by PBOC and China’s other financial authorities.
The recognition rules also highlight improvements to fair pricing and liquidity mechanisms, and trading via markets approved by the State Council such as interbank markets and securities exchanges.
