Announcement of the China Banking and Insurance Regulatory Commission on Seeking Public Comments on the Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (Draft for Comment)
Announcement of the China Banking and Insurance Regulatory Commission on Seeking Public Comments on the Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (Draft for Comment)
Announcement of the China Banking and Insurance Regulatory Commission on Seeking Public Comments on the Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (Draft for Comment)
July 20, 2018
To implement the decisions and plans of the Central Committee of the Communist Party of China and the State Council for winning the tough battle of preventing and resolving major risks, promoting the unification of regulatory standards for asset management products and driving the regulated and healthy development of wealth management business of banks, the China Banking and Insurance Regulatory Commission has drafted the Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (Draft for Comment) which are hereby issued for public comment. The general public may give their opinions through the following ways.
1. Visiting the official website of the Legislative Affairs Office of the State Council (address: http://www.chinalaw.gov.cn) to give opinions through the Column "Comments Sought on the Legislation" under the main menu on the first page.
2. Sending opinions by e-mail to cxcp@cbrc.gov.cn.
3. Sending opinions by post to the China Banking and Insurance Regulatory Commission at No.15 Finance Street Jia, Xicheng District, Beijing 100140, and specifying the phrase "Public Consultation for Measures for the Supervision and Administration of Wealth Management Business" on the envelope.
The deadline for the public consultation falls on August 19, 2018.
Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (Draft for Comment)
Chapter I General Provisions
Chapter II Classified Administration
Chapter III Business Rules and Risk Management
Chapter IV Supervision and Administration
Chapter V Legal Liability
Chapter VI Supplementary Provisions
Chapter I General Provisions
Article 1 (On the Legislative Basis) To strengthen supervision and administration of wealth management business of commercial banks, promote the regulated and healthy development of wealth management business of commercial banks, and safeguard the lawful rights and interests of financial consumers according to the law, these Measures are formulated in accordance with the such laws and administrative regulations as the Banking Regulation Law of the People's Republic of China and the Law of the People's Republic of China on Commercial Banks, and the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (hereinafter referred to as the "Guiding Opinions").
Article 2 (On the Applicable Scope) Commercial banks, including Chinese-funded commercial banks, wholly foreign-funded banks and Sino-foreign joint venture banks, established within the territory of the People's Republic of China shall be governed by these Measures.
Article 3 (On Definitions) For the purpose of these Measures, wealth management business refers to the financial services where commercial banks are commissioned by investors to invest and manage the commissioned property of investors in accordance with investment strategies, risk tolerance and ways of profit distribution as agreed with investors in advance.
For the purpose of these Measures, wealth management products refer to non-principal-protected wealth management products where commercial banks distribute returns to investors depending on the agreed conditions and actual returns on investment but do not guarantee the repayment of the principal and the amount of returns.
Article 4 (On the Independence of Products) The property under wealth management products of a commercial bank shall be independent of the self-owned property of managers and custody institutions, and any property derived from managing, utilizing, or disposing of the property under wealth management products or from other situations shall be all counted as the property under wealth management products of the bank.
Neither the manager nor the custody institution for wealth management products of a commercial bank may include any property under wealth management products of the bank into its own property; where the manager or the custody institution is liquidated as it is dissolved or canceled or declares its bankruptcy according to the law, the property under wealth management products of this bank shall not be counted as the liquidation property.
Article 5 (On the Prohibition of Offset) The creditors' rights created as a result of the management, utilization and disposal of wealth management products by the manager for the wealth management products of a commercial bank shall not be used to offset the debts formed in association with the manager's or the custody institution's self-owned property; the creditors' rights and debts created as a result of the management, utilization and disposal of the property under different wealth management products by the manager shall not be used to offset each other.
Article 6 (On Basic Principles) In carrying out wealth management business, commercial banks shall perform duties in managing money matters on behalf of others as entrusted in an honest, faithful, diligent and responsible manner, in accordance with relevant provisions of Article 8 of the Guiding Opinions, and investors shall bear investment risks on their own and receive returns.
In carrying out wealth management business, commercial banks shall follow the principles of making costs measurable, risks controllable and information adequately disclosed, and protect the lawful rights and interests of financial consumers in strict accordance with requirements on investor suitability management.
Article 7 (On Regulatory Subjects and Regulatory Principles) Banking regulators shall supervise and administer wealth management business activities of commercial banks in accordance with the law.
Banking regulators shall subject wealth management business to penetrative supervision, and identify the ultimate investors and the underlying assets of wealth management products, and carry out all-round dynamic supervision of the operation and management of wealth management products.
Chapter II Classified Administration
Article 8 (On Product Classification-Publicly Offered and Privately Offered) Commercial banks shall classify wealth management products into publicly offered wealth management products and privately offered wealth management products, depending on the different ways in which funds are raised.
For the purpose of these Measures, publicly offered wealth management products refer to wealth management products publicly offered by commercial banks to non-specific targets. The standards to determine the public offering shall be subject to the Securities Law of the People's Republic of China. Relevant provisions concerning the investment of publicly offered wealth management products in stocks listed and traded within the territory will be separately listed by the banking regulator of the State Council.
For the purpose of these Measures, privately offered wealth management products refer to wealth management products not publicly offered by commercial banks merely to qualified investors. A qualified investor refers to a natural person, a legal person or a legally established organization of another kind that has the necessary capacity to identify and tolerate risks, invests at least a certain amount in a single wealth management product and satisfies the following criteria,
1. A natural person who has investment experience of more than two years and meets any of the following criteria: net financial assets held by his or her family are no less than CNY3 million, financial assets held by his or her family are no less than CNY5 million, or the annual average income received by him or her in the past three years was no less than CNY400,000;
2. A legal person or an organization of another kind that owns net assets of no less than CNY10 million at the end of the last year;
3. Other circumstances specified by the banking regulator of the State Council.
The investment scope for privately offered wealth management products shall be agreed upon in contracts, and may cover debt assets, equity assets, etc. Equity assets refer to stocks listed and traded within the territory, and equities of non-listed enterprises as well as the right to benefits (returns).
Article 9 (On Product Classification-Fixed-income, Equity, Derivative and Hybrid) Commercial banks shall, depending on the different nature of investment, classify wealth management products into wealth management products featuring fixed income, wealth management products of the equity type, and wealth management products targeting commodities and financial derivatives, and hybrid wealth management products. At least 80% of funds raised through wealth management products featuring fixed income are invested in deposits, bonds or other debt assets; at least 80% of funds raised through wealth management products of the equity type are invested in equity assets; at least 80% of funds raised through wealth management products targeting commodities and financial derivatives are invested in commodities and financial derivatives; the respective proportion of funds raised through hybrid wealth management products to invest in debt assets, equity assets, and commodity and financial derivative assets does not reach the threshold of the aforesaid three types of wealth management products.
Where the aforesaid limit on the percentage is exceeded not because of subjective factors of commercial banks, they shall adjust the percentage to meet the relevant requirements within 15 trading days of when liquidity-restricted assets can be sold or transferred or the trading thereof is resumed.
Article 10 (On Product Classification-Close-end and Open-end) Commercial banks shall classify wealth management products into closed-end ones and open-end ones.
For the purpose of these Measures, closed-end wealth management products refer to wealth management products: (1) which will become mature at the designated date; (2) the total units of which remain unchanged from the date such products are created to the date they become mature; and (3) which investors cannot subscribe or redeem. For the purpose of these Measures, open-end wealth management products refer to wealth management products: (1) the total units of which are not fixed from the date such products are created to the date they become mature; and (2) which investors may subscribe or redeem on the trading days at the place designated in the product agreements.
Article 11 (On Business Qualifications) Commercial banks qualified to trade derivative products may offer wealth management products which are used to invest in derivative products, in accordance with the relevant provisions of the banking regulator of the State Council in respect of the business management of derivative products.
Where the wealth management business carried out by commercial banks involves foreign exchange business, they shall have the qualification for relevant foreign exchange business, and abide by provisions concerning the administration of foreign exchange.
Article 12 (On Centralized Registration) The headquarters of a commercial bank shall, as per the following requirements, register its wealth management products in a centralized manner in the National Banking Wealth Management Information Registration System,
1. For a commercial bank that publicly offers wealth management products, its headquarters shall carry out the registration in the National Banking Wealth Management Information Registration System ten days prior to the sale of wealth management products;
2. For a commercial bank that privately offers wealth management products, its headquarters shall carry out the registration in the National Banking Wealth Management Information Registration System two days prior to the sale of wealth management products;
3. The headquarters shall, pursuant to applicable provisions, constantly register relevant information about wealth management products, including the fundraising, subscription, redemption, investor information, invested assets, breakdown of transactions in assets, valuation of assets, and liabilities, when wealth management products are offered to raise funds and have not matured yet;
4. The headquarters shall register the termination within five days from the termination of wealth management products.
A commercial bank shall ensure the truthfulness, accuracy, completeness and timeliness of registration information about its wealth management products. Where the information registered is incomplete or fails to meet the relevant requirements, the commercial bank shall provide additional information or re-handle the registration.
Any commercial bank shall not offer a wealth management product which has not been registered in the National Banking Wealth Management Information Registration System for a registration code and assigned a registration code. The commercial bank shall explicitly indicate the registration code issued by the National Banking Wealth Management Information Registration System for a wealth management product in a prominent position of the sale materials for such product, and remind investors that they may use such registration code to inspect information about such product on the website at Chinawealth.com.cn.
The Banking Wealth Management Registration and Custody Center shall perform the following duties, under the guidance of the banking regulator of the State Council,
1. Constantly strengthen the development and management of the National Banking Wealth Management Information Registration System, and ensure the independence, security and efficient operation of the system;
2. Make improvements to the business rules, operating procedures and technical specifications on the registration of information on wealth management, and better monitor the quality of the registration of information on wealth management;
3. Report on the wealth management business and the operation of the system to the banking regulator of the State Council;
4. Provide necessary technical support, business training and other relevant services; and
5. Use information in compliance with laws and regulations, establish a non-disclosure system and take corresponding measures to maintain confidentiality, to ensure information security.
Chapter III Business Rules and Risk Management
Section I Management System and Management Rules
Article 13 (On the Duties of the Board of Directors and Senior Management Team) The board of directors and senior management team of a commercial bank shall have a full understanding of wealth management business and all risks such business faces, work out the general strategies and policies for wealth management business in consideration of its own business objectives, investment management capacity, risk management level and other relevant factors, and have in place relevant human and material resources, including professionals, business processing systems, financial accounting systems and management information systems, which are necessary for the wealth management business and risk management.
Article 14 (On Collective and Centralized Management) A commercial bank shall carry out wealth management business through a subsidy with independent legal personality. Where conditions do not permit for the time being, the headquarters of the commercial bank shall set up a specialized department for wealth management business, and carried out and manage wealth management business in a collective and centralized manner.
Regulatory provisions on the establishment of wealth management subsidies by commercial banks will be formulated by the banking regulator of the State Council separately.
Article 15 (On Business Separation) A commercial bank that carries out wealth management business shall ensure that wealth management business is separated from other business, wealth management products are separated from financial products that it sells on a commissioned basis, wealth management products are separated from each other, and operations for wealth management business are separated from those for other business.
Article 16 (On Management Rules for Wealth Management Business) A commercial bank shall, depending on the nature of wealth management business and risk characteristics, establish and improve management systems for wealth management business, including product access management, risk management and internal control, personnel management, sales management, investment management, management of cooperative agencies, product custody, product valuation, financial accounting and information disclosure.
The commercial bank shall formulate and implement corresponding policies and procedures for risk management, targeting the risk characteristics of wealth management business, to ensure the continual and effective identification, measurement, monitoring and control of various risks concerning wealth management business, and incorporate risk management for wealth management business into its comprehensive risk management system. The commercial bank shall, in accordance with relevant provisions of the banking regulator of the State Council in respect of internal control, establish and improve an internal control system for wealth management business, as an integral part of the overall internal control system for the bank.
The internal audit department of the commercial bank shall, in accordance with relevant provisions of the banking regulator of the State Council in respect of internal audit, perform an internal audit of the wealth management business at least once a year, and submit the audit report to the audit committee and the board of directors. The board of directors shall urge the senior management team to take prompt measures to correct problems revealed by internal control. The internal audit department shall follow up and check the implementation of corrective measures, and submit relevant reports to the board of directors in a timely manner.
The commercial bank shall, in accordance with relevant provisions of the banking regulator of the State Council in respect of the external audit, commission an external audit agency to perform the external audit of wealth management business and of publicly offered wealth management products at least once a year, and take prompt measures to correct problems revealed by the external audit.
Article 17 (On Access of New Products) A commercial bank shall establish policies and procedures for the internal examination and approval of wealth management products, fully identify and assess various risks before the launch of new products; and such policies and procedures shall be examined by relevant functional departments of risk management, legal affairs and compliance, financial accounting management, consumer protection, etc., and approved by the board of directors, the specialized committee authorized by the board of directors, the senior management team or the relevant department.
Article 18 (On Risk Isolation) A commercial bank that carries out wealth management business shall ensure that each wealth management product corresponds to the assets invested and that each wealth management product is managed separately with independent account books and separate accounting, and is not allowed to carry out or engage in cash-pooling-based wealth management business featuring scrolled issuance, centralized operation and separate pricing.
For the purpose of these Measures, the term "being managed separately or separate management" means the independent investment management of each wealth management product. The term "independent account books" means the investment breakdown established for each wealth management product to ensure that each item of invested assets is definite. The term "separate accounting" means the independent processing of accounting affairs for each wealth management product to ensure that accounting statements, including the balance sheet, the profits statement and the sheet of variations in net values of products, are available for each wealth management product.
Article 19 (On Valuation and Accounting) A commercial bank that carries out wealth management business shall, in accordance with the relevant provisions of the Accounting Standards for Business Enterprises and the Guiding Opinions in respect of valuation and accounting of financial assets, recognize and measure the net values of wealth management products.
Article 20 (On market-oriented transactions and fair transactions) A commercial bank that carries out wealth management business shall, under the principle of market-oriented transactions and fair transactions, not transfer benefits between different wealth management products, between different investors of wealth management products or between investors of wealth management business and other subjects.
Article 21 (On Related-party Transactions) Where the wealth management products of a commercial bank are used to invest in securities issued or underwritten by the bank itself or its custody institution, or by an institution controlled or invested by its major shareholder, controlling shareholder, actual controller, party acting in concert or ultimate beneficiary or by a company that has material interests in such party, or to seek other major related-party transactions, such investment or transactions shall be carried out under business principles on conditions that are not more preferential than similar transactions with non-related parties, provided that the investment objectives and investment strategies of these wealth management products are observed and investors' interests are the priority; also, relevant information shall be adequately disclosed to investors.
The commercial bank shall, in accordance with relevant provisions of the financial regulators in respect of related-party transactions, establish and improve an internal mechanism to evaluate, examine and approve related-party transactions relating to wealth management business.
......
July 20, 2018
To implement the decisions and plans of the Central Committee of the Communist Party of China and the State Council for winning the tough battle of preventing and resolving major risks, promoting the unification of regulatory standards for asset management products and driving the regulated and healthy development of wealth management business of banks, the China Banking and Insurance Regulatory Commission has drafted the Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (Draft for Comment) which are hereby issued for public comment. The general public may give their opinions through the following ways.
1. Visiting the official website of the Legislative Affairs Office of the State Council (address: http://www.chinalaw.gov.cn) to give opinions through the Column "Comments Sought on the Legislation" under the main menu on the first page.
2. Sending opinions by e-mail to cxcp@cbrc.gov.cn.
3. Sending opinions by post to the China Banking and Insurance Regulatory Commission at No.15 Finance Street Jia, Xicheng District, Beijing 100140, and specifying the phrase "Public Consultation for Measures for the Supervision and Administration of Wealth Management Business" on the envelope.
The deadline for the public consultation falls on August 19, 2018.
Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (Draft for Comment)
Chapter I General Provisions
Chapter II Classified Administration
Chapter III Business Rules and Risk Management
Chapter IV Supervision and Administration
Chapter V Legal Liability
Chapter VI Supplementary Provisions
Chapter I General Provisions
Article 1 (On the Legislative Basis) To strengthen supervision and administration of wealth management business of commercial banks, promote the regulated and healthy development of wealth management business of commercial banks, and safeguard the lawful rights and interests of financial consumers according to the law, these Measures are formulated in accordance with the such laws and administrative regulations as the Banking Regulation Law of the People's Republic of China and the Law of the People's Republic of China on Commercial Banks, and the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (hereinafter referred to as the "Guiding Opinions").
Article 2 (On the Applicable Scope) Commercial banks, including Chinese-funded commercial banks, wholly foreign-funded banks and Sino-foreign joint venture banks, established within the territory of the People's Republic of China shall be governed by these Measures.
Article 3 (On Definitions) For the purpose of these Measures, wealth management business refers to the financial services where commercial banks are commissioned by investors to invest and manage the commissioned property of investors in accordance with investment strategies, risk tolerance and ways of profit distribution as agreed with investors in advance.
For the purpose of these Measures, wealth management products refer to non-principal-protected wealth management products where commercial banks distribute returns to investors depending on the agreed conditions and actual returns on investment but do not guarantee the repayment of the principal and the amount of returns.
Article 4 (On the Independence of Products) The property under wealth management products of a commercial bank shall be independent of the self-owned property of managers and custody institutions, and any property derived from managing, utilizing, or disposing of the property under wealth management products or from other situations shall be all counted as the property under wealth management products of the bank.
Neither the manager nor the custody institution for wealth management products of a commercial bank may include any property under wealth management products of the bank into its own property; where the manager or the custody institution is liquidated as it is dissolved or canceled or declares its bankruptcy according to the law, the property under wealth management products of this bank shall not be counted as the liquidation property.
Article 5 (On the Prohibition of Offset) The creditors' rights created as a result of the management, utilization and disposal of wealth management products by the manager for the wealth management products of a commercial bank shall not be used to offset the debts formed in association with the manager's or the custody institution's self-owned property; the creditors' rights and debts created as a result of the management, utilization and disposal of the property under different wealth management products by the manager shall not be used to offset each other.
Article 6 (On Basic Principles) In carrying out wealth management business, commercial banks shall perform duties in managing money matters on behalf of others as entrusted in an honest, faithful, diligent and responsible manner, in accordance with relevant provisions of Article 8 of the Guiding Opinions, and investors shall bear investment risks on their own and receive returns.
In carrying out wealth management business, commercial banks shall follow the principles of making costs measurable, risks controllable and information adequately disclosed, and protect the lawful rights and interests of financial consumers in strict accordance with requirements on investor suitability management.
Article 7 (On Regulatory Subjects and Regulatory Principles) Banking regulators shall supervise and administer wealth management business activities of commercial banks in accordance with the law.
Banking regulators shall subject wealth management business to penetrative supervision, and identify the ultimate investors and the underlying assets of wealth management products, and carry out all-round dynamic supervision of the operation and management of wealth management products.
Chapter II Classified Administration
Article 8 (On Product Classification-Publicly Offered and Privately Offered) Commercial banks shall classify wealth management products into publicly offered wealth management products and privately offered wealth management products, depending on the different ways in which funds are raised.
For the purpose of these Measures, publicly offered wealth management products refer to wealth management products publicly offered by commercial banks to non-specific targets. The standards to determine the public offering shall be subject to the Securities Law of the People's Republic of China. Relevant provisions concerning the investment of publicly offered wealth management products in stocks listed and traded within the territory will be separately listed by the banking regulator of the State Council.
For the purpose of these Measures, privately offered wealth management products refer to wealth management products not publicly offered by commercial banks merely to qualified investors. A qualified investor refers to a natural person, a legal person or a legally established organization of another kind that has the necessary capacity to identify and tolerate risks, invests at least a certain amount in a single wealth management product and satisfies the following criteria,
1. A natural person who has investment experience of more than two years and meets any of the following criteria: net financial assets held by his or her family are no less than CNY3 million, financial assets held by his or her family are no less than CNY5 million, or the annual average income received by him or her in the past three years was no less than CNY400,000;
2. A legal person or an organization of another kind that owns net assets of no less than CNY10 million at the end of the last year;
3. Other circumstances specified by the banking regulator of the State Council.
The investment scope for privately offered wealth management products shall be agreed upon in contracts, and may cover debt assets, equity assets, etc. Equity assets refer to stocks listed and traded within the territory, and equities of non-listed enterprises as well as the right to benefits (returns).
Article 9 (On Product Classification-Fixed-income, Equity, Derivative and Hybrid) Commercial banks shall, depending on the different nature of investment, classify wealth management products into wealth management products featuring fixed income, wealth management products of the equity type, and wealth management products targeting commodities and financial derivatives, and hybrid wealth management products. At least 80% of funds raised through wealth management products featuring fixed income are invested in deposits, bonds or other debt assets; at least 80% of funds raised through wealth management products of the equity type are invested in equity assets; at least 80% of funds raised through wealth management products targeting commodities and financial derivatives are invested in commodities and financial derivatives; the respective proportion of funds raised through hybrid wealth management products to invest in debt assets, equity assets, and commodity and financial derivative assets does not reach the threshold of the aforesaid three types of wealth management products.
Where the aforesaid limit on the percentage is exceeded not because of subjective factors of commercial banks, they shall adjust the percentage to meet the relevant requirements within 15 trading days of when liquidity-restricted assets can be sold or transferred or the trading thereof is resumed.
Article 10 (On Product Classification-Close-end and Open-end) Commercial banks shall classify wealth management products into closed-end ones and open-end ones.
For the purpose of these Measures, closed-end wealth management products refer to wealth management products: (1) which will become mature at the designated date; (2) the total units of which remain unchanged from the date such products are created to the date they become mature; and (3) which investors cannot subscribe or redeem. For the purpose of these Measures, open-end wealth management products refer to wealth management products: (1) the total units of which are not fixed from the date such products are created to the date they become mature; and (2) which investors may subscribe or redeem on the trading days at the place designated in the product agreements.
Article 11 (On Business Qualifications) Commercial banks qualified to trade derivative products may offer wealth management products which are used to invest in derivative products, in accordance with the relevant provisions of the banking regulator of the State Council in respect of the business management of derivative products.
Where the wealth management business carried out by commercial banks involves foreign exchange business, they shall have the qualification for relevant foreign exchange business, and abide by provisions concerning the administration of foreign exchange.
Article 12 (On Centralized Registration) The headquarters of a commercial bank shall, as per the following requirements, register its wealth management products in a centralized manner in the National Banking Wealth Management Information Registration System,
1. For a commercial bank that publicly offers wealth management products, its headquarters shall carry out the registration in the National Banking Wealth Management Information Registration System ten days prior to the sale of wealth management products;
2. For a commercial bank that privately offers wealth management products, its headquarters shall carry out the registration in the National Banking Wealth Management Information Registration System two days prior to the sale of wealth management products;
3. The headquarters shall, pursuant to applicable provisions, constantly register relevant information about wealth management products, including the fundraising, subscription, redemption, investor information, invested assets, breakdown of transactions in assets, valuation of assets, and liabilities, when wealth management products are offered to raise funds and have not matured yet;
4. The headquarters shall register the termination within five days from the termination of wealth management products.
A commercial bank shall ensure the truthfulness, accuracy, completeness and timeliness of registration information about its wealth management products. Where the information registered is incomplete or fails to meet the relevant requirements, the commercial bank shall provide additional information or re-handle the registration.
Any commercial bank shall not offer a wealth management product which has not been registered in the National Banking Wealth Management Information Registration System for a registration code and assigned a registration code. The commercial bank shall explicitly indicate the registration code issued by the National Banking Wealth Management Information Registration System for a wealth management product in a prominent position of the sale materials for such product, and remind investors that they may use such registration code to inspect information about such product on the website at Chinawealth.com.cn.
The Banking Wealth Management Registration and Custody Center shall perform the following duties, under the guidance of the banking regulator of the State Council,
1. Constantly strengthen the development and management of the National Banking Wealth Management Information Registration System, and ensure the independence, security and efficient operation of the system;
2. Make improvements to the business rules, operating procedures and technical specifications on the registration of information on wealth management, and better monitor the quality of the registration of information on wealth management;
3. Report on the wealth management business and the operation of the system to the banking regulator of the State Council;
4. Provide necessary technical support, business training and other relevant services; and
5. Use information in compliance with laws and regulations, establish a non-disclosure system and take corresponding measures to maintain confidentiality, to ensure information security.
Chapter III Business Rules and Risk Management
Section I Management System and Management Rules
Article 13 (On the Duties of the Board of Directors and Senior Management Team) The board of directors and senior management team of a commercial bank shall have a full understanding of wealth management business and all risks such business faces, work out the general strategies and policies for wealth management business in consideration of its own business objectives, investment management capacity, risk management level and other relevant factors, and have in place relevant human and material resources, including professionals, business processing systems, financial accounting systems and management information systems, which are necessary for the wealth management business and risk management.
Article 14 (On Collective and Centralized Management) A commercial bank shall carry out wealth management business through a subsidy with independent legal personality. Where conditions do not permit for the time being, the headquarters of the commercial bank shall set up a specialized department for wealth management business, and carried out and manage wealth management business in a collective and centralized manner.
Regulatory provisions on the establishment of wealth management subsidies by commercial banks will be formulated by the banking regulator of the State Council separately.
Article 15 (On Business Separation) A commercial bank that carries out wealth management business shall ensure that wealth management business is separated from other business, wealth management products are separated from financial products that it sells on a commissioned basis, wealth management products are separated from each other, and operations for wealth management business are separated from those for other business.
Article 16 (On Management Rules for Wealth Management Business) A commercial bank shall, depending on the nature of wealth management business and risk characteristics, establish and improve management systems for wealth management business, including product access management, risk management and internal control, personnel management, sales management, investment management, management of cooperative agencies, product custody, product valuation, financial accounting and information disclosure.
The commercial bank shall formulate and implement corresponding policies and procedures for risk management, targeting the risk characteristics of wealth management business, to ensure the continual and effective identification, measurement, monitoring and control of various risks concerning wealth management business, and incorporate risk management for wealth management business into its comprehensive risk management system. The commercial bank shall, in accordance with relevant provisions of the banking regulator of the State Council in respect of internal control, establish and improve an internal control system for wealth management business, as an integral part of the overall internal control system for the bank.
The internal audit department of the commercial bank shall, in accordance with relevant provisions of the banking regulator of the State Council in respect of internal audit, perform an internal audit of the wealth management business at least once a year, and submit the audit report to the audit committee and the board of directors. The board of directors shall urge the senior management team to take prompt measures to correct problems revealed by internal control. The internal audit department shall follow up and check the implementation of corrective measures, and submit relevant reports to the board of directors in a timely manner.
The commercial bank shall, in accordance with relevant provisions of the banking regulator of the State Council in respect of the external audit, commission an external audit agency to perform the external audit of wealth management business and of publicly offered wealth management products at least once a year, and take prompt measures to correct problems revealed by the external audit.
Article 17 (On Access of New Products) A commercial bank shall establish policies and procedures for the internal examination and approval of wealth management products, fully identify and assess various risks before the launch of new products; and such policies and procedures shall be examined by relevant functional departments of risk management, legal affairs and compliance, financial accounting management, consumer protection, etc., and approved by the board of directors, the specialized committee authorized by the board of directors, the senior management team or the relevant department.
Article 18 (On Risk Isolation) A commercial bank that carries out wealth management business shall ensure that each wealth management product corresponds to the assets invested and that each wealth management product is managed separately with independent account books and separate accounting, and is not allowed to carry out or engage in cash-pooling-based wealth management business featuring scrolled issuance, centralized operation and separate pricing.
For the purpose of these Measures, the term "being managed separately or separate management" means the independent investment management of each wealth management product. The term "independent account books" means the investment breakdown established for each wealth management product to ensure that each item of invested assets is definite. The term "separate accounting" means the independent processing of accounting affairs for each wealth management product to ensure that accounting statements, including the balance sheet, the profits statement and the sheet of variations in net values of products, are available for each wealth management product.
Article 19 (On Valuation and Accounting) A commercial bank that carries out wealth management business shall, in accordance with the relevant provisions of the Accounting Standards for Business Enterprises and the Guiding Opinions in respect of valuation and accounting of financial assets, recognize and measure the net values of wealth management products.
Article 20 (On market-oriented transactions and fair transactions) A commercial bank that carries out wealth management business shall, under the principle of market-oriented transactions and fair transactions, not transfer benefits between different wealth management products, between different investors of wealth management products or between investors of wealth management business and other subjects.
Article 21 (On Related-party Transactions) Where the wealth management products of a commercial bank are used to invest in securities issued or underwritten by the bank itself or its custody institution, or by an institution controlled or invested by its major shareholder, controlling shareholder, actual controller, party acting in concert or ultimate beneficiary or by a company that has material interests in such party, or to seek other major related-party transactions, such investment or transactions shall be carried out under business principles on conditions that are not more preferential than similar transactions with non-related parties, provided that the investment objectives and investment strategies of these wealth management products are observed and investors' interests are the priority; also, relevant information shall be adequately disclosed to investors.
The commercial bank shall, in accordance with relevant provisions of the financial regulators in respect of related-party transactions, establish and improve an internal mechanism to evaluate, examine and approve related-party transactions relating to wealth management business.
......