INVESTMENT BANKING | Staff Reporter, China

Nearly 30 Chinese banks are setting up asset and wealth management units

The move comes after looser rules on AM activities.

Nearly 30 banks in China have unveiled plans to establish asset and wealth management subsidiaries after the country’s banking and insurance regulator relaxed rules on investment activities in late 2018, reports 

Bank of Communications earlier announced its plan to invest $1.25b (8b yuan) to set up an asset management subsidiary in Shanghai where it joins the ranks of smaller lenders China Merchants Bank, Huaxia Bank, Bank of Beijing and Bank of Ningbo, who have similarly applied to spin off separate asset management units, according to the South China Morning Post.

Also read: Check out the growth of AUM held by China's asset management industry

Banks can leverage on their size, existing client base, wide distribution channels and strength in fixed income products in their venture into the equity markets after the China Banking and Insurance Regulatory Commission issued administrative measures for wealth management subsidiaries and set the threshold requirement for registered capital at $147.71m (CNY1b).

Lenders in China previously had limited options for asset management activities as they were not allowed to invest directly in private equity funds or listed securities.

Also read: New AM rules to stem rapid slowdown in Chinese bank credit

The new guidelines tackle implicit guarantees, capital-asset pooling, investment in non-standard credit assets (NSCAs), over-leverage and channel businesses to bring the business in line with international standards and reduce room for regulatory arbitrage. The tighter regulation comes as Beijing spearheads a widespread crackdown on the country’s $15t asset management sector by closing loopholes that previously allowed banks to escape regulatory scrutiny particularly on shadow banking products and off-balance sheet activities.

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