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    CBIRC Notice on Regulating Structured Deposit Business of Banks

    October 18, 2019

    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. 


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    Effective Date: October 18, 2019

    Keywords: Asia Pacific, China, Banking, Structured Deposits, General Deposits, Risk Management, Q&A, CBIRC

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