BEIJING, June 15 (Xinhua) -- China issued new rules to enhance supervision and regulation over cash management type of wealth management products (WMP) of commercial banks and wealth management firms, effective as from June 11, reported Xinhua-run Xinhua Finance.
The new rules, jointly released by China Banking and Insurance Regulatory Commission (CBIRC) and Chinese central bank last week, target boosting healthy development of cash management products and better protecting the rights and interests of investors.
As their announcement tells, cash management products here refer to WMPs issued by banks or wealth management firms that only invest in money market vehicles and can be subscribed and redeemed on each trading day.
The type of products is also prohibited to invest in stocks, convertible bonds, exchangeable bonds, floating rate bonds that, excluding those having already entered the last phase for rate adjustment, take time deposit rates as benchmark interest rates, and bonds or asset-backed securities with lower than AA+ ratings.
By taking into consideration of the potential influences over banks, wealth management companies and the financial market, a transition period from June 11 to the end of 2022 is set to facilitate stable operation of cash management products business of banks and wealth management firms, said the report citing officials with CBIRC and the Chinese central bank.
The new rules reinforce from five aspects liquidity and leverage control management over the type of cash management products by strengthening investment portfolio liquidity management, leverage ratio control, duration management, decentralization degree of investors and financing transaction management.
For instance, the new rules set the lower proportion limit for cash management products' holdings of assets with high liquidity and the proportion ceiling for their holdings of assets with limited liquidity.
What's more, the leverage ratio of cash management products of the type shall not be higher than 120 percent, according to the new rules.
Besides, the new rules require cash management products of the type to adopt amortized costs method and shadow pricing in accounting valuation.
Since entering into force of the new rules on June 11, CBIRC and the Chinese central bank will supervise and urge banks and wealth management firms to press ahead with issuance of new products that meet requirements of the new rules, the report said. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
A single purchase
