China’s top banking regulator has outlined plans to order the suspension of custodian operations by commercial banks that fail to satisfy new requirements.
On 29 December 2022, the China Banking and Insurance Regulatory Commission (CBIRC) issued the draft version of the “Commercial Bank Custodian Operations Supervisory and Administrative Measures” (商业银行托管业务监督管理办法) for the solicitation of opinions from the public.
CBIRC said that the Measures are for the purpose “further strengthening the supervision and administration of commercial bank custodian operations, and expediting the standardised and healthy development of custodian operations by commercial banks.”
The move arrives after a steady increase in the provision of custodian operations and services by Chinese commercial banks in recent years, for a range of financial products including wealth management products, securities investment funds, securities company asset management products, insurance asset management products, welfare funds and pension funds.
“The Measures will focus on maintaining consistency with existing custodian rules in various areas, and the joint formation of a combined regulatory force for custodian operations by commercial banks,” a CBIRC official said.
Provisions of the Measures include the establishment of stronger risk management systems, strengthening the independence of custodian operations and the strengthening data protections, as well as strengthening due diligence of custodian products and outside organisations and enhancing risk segregation.
The Measures also stipulate that it will suspend the relevant operations of Chinese commercial banks whose custodian operations fail to satisfy the new prudential requirements.