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    CBIRC Finalizes Net Capital Rules for Wealth Management Subsidiaries

    December 02, 2019

    CBIRC published the rules on net capital of wealth management subsidiaries of commercial banks (Provisional). The rules will come into force on March 01, 2020. According to the rules, the net capital of wealth management subsidiaries shall meet the two standards. First, the net capital shall not be less than RMB 500 million and shall not be less than 40% of the net assets. Second, the net capital shall not be lower than the risk capital, with the aim to ensure that the wealth management subsidiaries maintain the net capital at a sufficient level. Additionally, CBIRC published questions and answers (Q&As) on these net capital rules for wealth management subsidiaries of banks.

    From September 20 to October 27, 2019, CBIRC had solicited public opinions on the rules and carefully studied the feedback to include the reasonable suggestions. The rules consist of 20 articles in four chapters. The chapters cover general provisions, net capital regulatory standards, supervision and management, and supplementary provisions. The rules constitute a supporting regulatory policy of the Rules on Wealth Management Business of Commercial Banks. They draw on the net capital regulatory requirements of asset management institutions and make appropriate adjustments based on the Guidance on Regulating Asset Management Business of Financial Institutions and the Rules on Wealth Management Business of Commercial Banks, while taking into consideration the characteristics of wealth management subsidiaries of commercial banks.

    The board of directors of the wealth management subsidiaries shall bear the ultimate responsibility for net capital management while the senior management shall be responsible for the net capital management. Wealth management subsidiaries shall regularly submit to the regulators net capital statements and be responsible for the authenticity, accuracy, and completeness of relevant statements, timely reporting of major changes in supervisory indicators, and disclosure of net capital status in the annual report. For wealth management subsidiaries that do not meet the net capital requirements, the banking regulators may take relevant measures in accordance with laws and regulations. CBIRC will continue to formulate supporting rules and policies and continuously improve the regulatory framework for wealth management business.

     

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    Effective Date: March 01, 2020

    Keywords: Asia Pacific, China, Banking, Securities, Wealth Management Subsidiary, Governance, Regulatory Capital, CBIRC

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