CBIRC Calls for China’s Asset Management Companies to Aid in Disposal of Trust Sector Non-performing Assets

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The China Banking and Insurance Regulatory Commission (CBIRC) has issued new rules that allow asset management companies (AMC) to come to the aid of trust companies seeking to dispose of their non-performing assets and risk assets.

Sources from multiple AMC’s told Diyi Caijing that CBIRC recently issued a notice giving the green light for China Trust Protection Fund Co,. Ltd., financial asset management companies and local asset management companies to cooperate in the disposal of the non-performing assets of trust companies and trust sector risk assets.

The Notice “supports China Trust Protection Fund Co., Ltd. , asset management companies and other market entities to actively participate in the disposal of trust sector risk assets, and by means of the introduction of diversified market participants strengthen the transaction activity of the market, and better expedite the discovery, increase and realisation of asset prices.”

It also flags “support for China Trust Protection Fund Co., Ltd. to acquire non-performing assets and trust risk assets from trust companies,” as well acquire “non-standard fund pools and other assets under financing category trust products that suffer from liquidity risk.”

The sources said that the notice allows non-performing assets and risk assets to be directly transferred to AMC’s by public methods such as auction, and that after trust companies sell risk assets to AMC’s the AMC’s themselves will be responsible for either independent disposal or disposal in cooperation with trust companies.

Trust companies will entrust AMC’s with services in relation to the management and disposal of risk assets, such as day-to-day management of creditor’s rights, debt recovery and debt restructuring.

China Trust Protection will be permitted to engage in “reverse entrustment acquisition,” entrusting trust companies with the management and disposal of risk assets that it acquires in order to ease liquidity pressure on trust companies while also expediting the dissolution of risk assets.

The notice also allows the transfer of risk assets to special purpose vehicles that are jointly established by China Trust Protection or other AMC’s in order to expedite more effective disposal.

“Trust companies and specialist organisations are encouraged to explore other disposal methods, and employ multiple methods to reduce the level of sector-wide risk,” said the Notice.

“For example, specialist organisations may engage in wholesale purchase of trust sector risk asset packages, and engage in subsequent disposal by means including wholesale transfer, securitisation, financial reorganisation and management reorganisation.”

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