China to regulate $15tr asset management

BEIJING: China’s central bank on Friday issued sweeping guidelines to tighten rules on asset management business, the latest step by Beijing to fend off systemic risks in the country’s rampantly growing shadow banking sector.
The guidelines unified rules covering asset management products issued by banks, trust firms, insurance asset management companies, securities firms, funds and futures companies, the People’s Bank of China said in a joint statement with the banking, insurance, securities and foreign exchange regulators. At the end of 2016, the collective outstanding volume of their asset management business was $15.38 trillion, including 29 trillion yuan of bank wealth management products and 17.5 trillion yuan in trust products, according to the PBOC. The new rules aim to close loopholes that allow regulatory arbitrage, reduce leverage levels to curb asset price bubbles and rein in shadow banking activity. The new rules will set leverage limits for asset management products. They will cap the total assets to net assets ratio at 140 percent for open mutual funds and 200 percent for private funds.