China's central bank tightens guidelines on asset management products

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BEIJING (Reuters) - China’s central bank issued on Friday draft guidelines to tighten regulations on financial institutions’ asset management business, a key component of the country’s rampantly growing shadow banking sector.

FILE PHOTO: A Chinese national flag flutters outside the headquarters of the People's Bank of China, the Chinese central bank, in Beijing, China April 3, 2014. REUTERS/Petar Kujundzic/File Photo

The new guidelines unified top-level regulations for asset management products issued by banks, trust firms, insurance asset management companies, securities firms, funds and futures companies, the People’s Bank of China said in an online statement issued jointly with the country’s banking, insurance, securities and foreign exchange regulators.

Financial institutions are not allowed to use asset management products to invest in commercial banks’ credit assets or provide “channel service” for other institutions to bypass regulations, the new draft rules said.

The guidelines also forbid financial institutions from conducting asset pools to manage funds raised through asset management products.

The central bank said it would control leverage levels for asset management products to curb asset price bubbles. Highly-indebted companies are not allowed to invest in such products.

Financial institutions are required to provision 10 percent of their management fee income from asset management products as risk reserves.

Institutions would be punished for providing implicit guarantees for asset management products.

Non-financial institutions are prohibited from issuing or selling asset management products.

The transition period for the new regulations will be until June 30, 2019, the statement said.

Reporting by Shu Zhang and Beijing monitoring desk; Editing by Jacqueline Wong

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