China’s financial regulators have published the final version of a new set of rules for the asset management subsidiaries of commercial banks, with analysts describing the new regulations as a boon for banks looking to profit from funds raised through wealth management products (WMPs), Caixin reports.
The rules will allow asset management subsidiaries to raise public stock funds and invest 35% of their assets in nonstandard credit assets.
Analysts described the rules as a relaxation of the government’s treatment of the massive WMP market, worth around RMB 30 trillion ($4.4 trillion). WMP funds will now be able legitimately to trickle into the stock market and the shadow banking sector, which is a crucial source of funding for private companies that often struggle to secure loans from banks.
The main goal of the regulations is to seal off the asset management industry from other parts of the financial sector, so that banks do not expect huge bailouts for asset management investments that go sour.