Recently, the Central Bank of China has issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (Draft for Comment) (the "Draft for Comment") to solicit public comments by December 16, 2017.
The Draft for Comment establishes the classification criteria for asset management products and clarifies the relevant regulatory standards on quota management, risk reserve requirements, liquidity management, and other aspects to comply with when making investment in non-standardized assets of creditors' rights by means of asset management products, in order to avoid degenerating into credit business in a disguised manner. The Draft for Comment stresses that financial institutions shall not make a commitment to guaranteed principal and capital gains when undertaking asset management business, and financial administration departments shall take appropriate punitive measures against the rigid payment behaviors. The Draft for Comment unifies the leverage requirements for asset management products in terms of both liabilities and grading, and sets different requirements on the debt ratios of the products in public offerings and private equity placements respectively. The Draft for Comment also proposes to reduce liquidity risk, inhibit multi-layer nested and passageway business, strengthen regulatory coordination, and sets the transition period.