CBIRC Sets Its Sights on Wealth Management Product Liquidity Risk


China’s banking authority plans to step up regulation of liquidity risk at the wealth management subsidiaries of the country’s commercial lenders.

The China Banking and Insurance Regulatory Commission (CBIRC) issued the draft version of the “Wealth Management Company Wealth Management Product Liquidity Risk Administrative Measures” (理财公司理财产品流动性风险管理办法(征求意见稿)) for the solicitation of opinions from the public on 8 September.

The draft version of the Measures mandate that wealth management firms engage in “comprehensive assessment of factors such investment product liquidity risk, investor category and risk preferences during the phase of the design of wealth management products.”

The draft Measures also mandate “prudential confirmation of the operating methods of products such as open and closed products, and rational design of subscription and redemption arrangements.”

Wealth management firms will be required to “effectively perform ongoing investment management of low liquidity assets, restricted liquidity assets and high liquidity assets, and raise the level of correspondence between product liquidity and product operating methods.”

“[Wealth management firms] shall continue to monitor the liquidity risk of wealth management products, and prudentially assess the valuation and liquidity of the various assets in which products invest.”