The China Banking and Insurance Regulatory Commission promulgated on November 29, 2019 the Measures for the Administration of Net Capital of Wealth Management Subsidiaries of Commercial Banks (Trial Implementation) (the “Measures”), which will go into effect on March 1, 2020. The Measures consist of four chapters and 20 articles, including the General Provisions, Net Capital Regulatory Standards, Supervision and Administration, and the Supplemental Provisions. The Measures aim to strengthen the supervision and management of the wealth management subsidiaries of commercial banks (the “Wealth Management Subsidiaries”), promote their safe and stable operation and protect the rights and interests of investors.
Pursuant to the Measures, the net capital of Wealth Management Subsidiaries should meet two criteria – no lower than RMB500 million and 40% of the net assets, and it should be lower than 100% of the risk capital – so as to ensure an adequate capital level. The board of directors of a Wealth Management Subsidiary shall assume the ultimate responsibility for net capital management, and the senior management shall be responsible for organizing and implementing the net capital management work. Wealth Management Subsidiaries shall submit a regulatory report on its net capital, be responsible for its authenticity, accuracy and completeness timely report any major changes in the relevant regulatory indicators, and disclose the status of net capital management in the annual report. For Wealth Management Subsidiaries that do not meet the net capital management requirements, a banking regulatory agency may take relevant regulatory measures.
The Measures are made to carry out the institutional requirements under the Guiding Opinions on Regulating Asset Management Businesses of Financial Institutions and the Measures for the Supervision and Administration of Wealth Management Businesses of Commercial Banks (and the Measures for the Administration of Wealth Management Subsidiaries of Commercial Banks). Net capital management helps Wealth Management Subsidiaries to shape prudent operational practices, keep business development commensurate with their operation and management capabilities to prevent blind business expansion and protect the rights and interests of the investors. Meanwhile, the Measures will also maintain fair competition among similar asset management institutions, prevent regulatory arbitrage and promote the healthy and orderly development of China’s asset management industry.