October 19, 2018

CBIRC issued a consultation on the "Administrative Measures for Commercial Banking Financial Subsidiaries." The measures were drafted keeping in mind the "Guiding Opinions on Regulating Financial Asset Management Business of Financial Institutions" and the "Measures for the Supervision and Administration of Financial Banking Business of Commercial Banks." The proposed measures stipulate the regulatory requirements for financial management subsidiaries to conduct wealth management business. Here, a financial subsidiary is referred to as a non-bank financial institution engaged in wealth management business for commercial banks. The deadline for comments is November 18, 2018.

These measures cover establishment of a financial management subsidiary by a commercial bank to conduct the asset management business and are intended to strengthen the risk management of the wealth management business of banks. According to the CBIRC spokesperson, the timing for commercial banks to set up wealth management business through the establishment of financial management subsidiaries is mature, as there are now clear requirements in the “new regulations for asset management." Commercial banks can combine their strategic planning and their own conditions to establish a financial management business through the establishment of a financial management subsidiary, in accordance with the principle of "commercial voluntariness." Alternatively, they can choose not to establish a new financial management subsidiary, but integrate the wealth management business into the already developed asset management business. 

However, a commercial bank will no longer conduct the wealth management business (except for the continued disposal of the stock wealth management products). The financial subsidiaries should operate independently and assume their own profits and losses, effectively preventing business risks from being transmitted to the parent bank. The measures consist of the following sections:

  • The general rules section mainly contains definitions, basic principles, and regulatory arrangements of financial subsidiaries and wealth management business.
  • The section on establishment of changes and terminations mainly stipulates the organizational form, naming rules, and approval procedures.
  • The business rules section stipulates the business scope, sales management, investment operation, management of cooperative institutions, investment management of self-owned funds, product registration, and other related matters of financial subsidiaries.
  • The risk management section stipulates requirements related to corporate governance, business management system, risk isolation, related-party transactions, risk reserve, net capital, internal control audit, and investor protection mechanism.
  • The supervisory management section contains requirements for the implementation of off-site supervision, on-site inspection, information reporting, regulatory measures, and administrative penalties for financial subsidiaries, with the final section focusing on supplementary regulations.

 

Related Links (in Chinese)

Comment Due Date: November 18, 2018

Keywords: Asia Pacific, China, Banking, Asset Management, Wealth Management Products, Bank Subsidiaries, CBIRC

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