China’s central bank is discussing extending a grace period for financial institutions to comply with sweeping new asset management rules covering a $12.9 trillion industry that were issued in 2018 and set to take effect in December 2020, officials said Friday at a press conference, reported Caixin.
Considering the impact of the Covid-19 pandemic, some experts suggested extending the transition period for another year or longer. But whether the delay lasts one, two or three years, the key is for financial institutions to transform their businesses, said Zhou Xuedong, director of the general executive office of the People’s Bank of China (PBOC). Going back to rampant off-balance sheet business, speculating with funds and creating financial chaos would be unacceptable, Zhou said.
The new asset management rules are intended to tame and reduce risks in a massive industry. As of the end of May, China had total outstanding wealth management products (WMPs) of RMB 90.1 trillion ($12.9 trillion), an increase of RMB 4 trillion since the start of 2020 and 3.5% more than at the same point last year, data from the central bank shows.
Under the new framework, financial institutions need to offload nonstandard assets or return them to their balance sheets by reasonably adjusting certain measurements.