What’s up: China’s banking regulator on Thursday released final rules governing the sales of wealth management products (WMPs), extending them to cover commercial banks and foreign companies and adding restrictions on the marketing of investments.

Otherwise, the final regulations of the China Banking and Insurance Regulatory Commission differ little from the draft released five months ago that blocked WMP sales on internet platforms. The rules come into effect on June 27.

Changes to the final rules include prohibiting the use or highlighting of absolute values ​​or interval values ​​to compare performance between WMPs, to promote expected returns in a disguised manner, and to market products as investments that can guarantee certain returns.

The final rules also extend their application to WMP units of commercial banks and to wealth management companies majority owned by foreign companies. There is also a new six-month transition period until the end of 2021 to allow establishments to correct non-compliant practices.

The background: WMPs are part of China’s $ 15 trillion asset management industry, which has been the target of a regulatory crackdown on risky side lending and excessive financial leverage.

The rules are part of sweeping regulations governing the industry that were first published in November 2017, but whose implementation has been delayed.

One of the main goals of the new rules is to prohibit banks from guaranteeing the performance of WMPs, a long-standing practice that encourages investors to pour money into risky, high-yielding assets while expecting State protection in the event of failure of the underlying investments, which poses significant problems. risk to the financial system.

Quick Takes are condensed versions of stories related to China for quick news that you can use. To read the full story in Chinese, click here.

Contact journalist Denise Jia ([email protected]) and editor Bob Simison ([email protected])

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