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Capital pool model regulation under China’s asset management regulations

Financial Regulation International

Capital pool model regulation under China’s asset management regulations

On 27 April 2018, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and the State Administration of Foreign Exchange jointly issued guidance on Regulating the Asset Management Business of Financial Institutions (No 106 [2018], hereafter “the New Regulations on Asset Management”). The document offers important guidance for preventing systemic financial risks and comprehensively regulating the asset management business of various financial institutions since the reform of China’s financial system. It has opened the era of unified supervision of “big asset management”, that is, developing from separate supervision to mixed supervision. It is also a regulation that responds to the problems and risks arising from asset management practice. Its core content bans the capital pool model, breaks down the rigid payment strategy and changes the net value of the financial products. However, the new regulations have many defects, and the implementation process is complex. As a result, the actual impact and regulatory effect remain subject to market evaluation.

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