FX.co ★ China to curb risks from asset management products

The government of China is planning to rein in risks in the country’s $15 of asset management products. Chinese regulators have developed a number of measures.

Following the announcement, Asian stock indices went down. Hong Kong’s Hang Seng slid by 0.1% on Monday, while Chinese Shanghai Composite dropped by 1%.

In a joint statement with financial regulators, the People's Bank of China said that financial institutions should offer yields based on the net asset value of the products they issue. Companies that fail to comply with that rule will be punished with additional reserve requirements.

The draft rules were unveiled for public consultation. Firms will be given a period until June 30, 2019, to comply.

The new rules will be applied to the 29 trillion yuan ($4.4 trillion) of wealth management products issued by banks, 17.5 trillion yuan of trust products, as well as asset management plans sold by insurers, fund managers and brokers. Financial institutions will be required to set aside risk provisions equivalent to 10% of the management fees.