CBRC introduces tougher trust firm guidelines: Sources

Regulators in China have issued tougher guidelines governing trust companies, Reuters reported, citing unnamed sources. The new rules from the China Banking Regulatory Commission aim to reduce liquidity risks associated with off-balance-sheet wealth management products (WMPs) by forbidding trusts from operating so-called “fund pools” that enable them to fund cash payouts on maturing products with the proceeds from new WMP sales. Trust companies must also develop clear mechanisms for shareholders to provide emergency support to the trust firm during periods of liquidity stress. This appears consistent with regulators’ overall approach to shadow banking, which has become an important funding source for weak borrowers.