CBIRC issued a notice on further regulating the structured deposit business of commercial banks. The notice defines "structural" (or "structured") deposits and sets strict distinction between structural deposits and general deposits. It also requires banks to formulate and implement corresponding risk management policies and procedures and put forward accounting and management requirements for structured deposits. The notice shall be implemented as of the date of promulgation. CBIRC also published questions and answers (Q&As) related to the notice.
The term "structural deposit" as used in this notice refers to the deposits embedded in financial derivatives absorbed by commercial banks. It is linked to fluctuations in interest rates, exchange rates, indices, and so on or linked to the credit situation of an entity, so that depositors are undertaking certain risks. Commercial banks issuing structural deposits shall have the qualification of general derivatives trading business and follow the relevant regulatory provisions on derivatives trading. Commercial banks shall strengthen compliance management on the sales of structured deposits in accordance with the relevant provisions of the Wealth Management Rules and improve information disclosure to protect the legitimate rights and interests of investors. Regulatory agencies shall strengthen off-site supervision and on-site examination and take regulatory measures or impose administrative penalties according to laws and regulations.
As for the arrangement of transition period, the notice adopts the policy arrangement of setting up transition period and "dividing the old from the new" (grandfathering). The transition period shall be 12 months starting from the date of implementation of the notice. During the transition period, commercial banks can continue to issue the former structural deposits (old products), yet these products shall be strictly controlled within the overall scale of existing products and be reduced in an orderly way. After the transition period, structured deposits newly issued by commercial banks shall conform to the provisions of this notice. For commercial banks that cannot comply with the provisions of this notice due to special reasons after the end of the transition period, with the consent of the banking regulatory authority, appropriate arrangements could be adopted. In the next step, CBIRC will further strengthen the supervision and management of structured deposit business and urge commercial banks to strictly implement relevant regulatory provisions to effectively prevent risks.
Effective Date: October 18, 2019
Keywords: Asia Pacific, China, Banking, Structured Deposits, General Deposits, Risk Management, Q&A, CBIRC
Previous ArticleCPMI Report Examines Impact of Global Stablecoins
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.
EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).
As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).