China Moves to Rein in Risks From Asset-Management Products
- Draft rules aimed at breaking implicit guarantee of returns
- Regulators have stepped up efforts to curb financial risk
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China’s financial regulators proposed sweeping rules to curb risks in the country’s $15 trillion of asset-management products as leaders move to tighten supervision and break an implicit guarantee that’s driven investment into such vehicles.
Financial institutions should offer yields based on the net asset value of the products they issue, to reflect the risks and return of the underlying assets, instead of offering a guaranteed principal repayment or rate of return, the People’s Bank of China said in a joint statement with other financial regulators on Friday. Firms that fail to comply with that rule will be punished with measures such as additional reserve requirements, they said.