Event: September 8, 2021, The China Banking and Insurance Regulatory Commission issued the notice on regulating the management of cash management financial products (Draft for comments) (hereinafter referred to as the draft for comments). On December 17, 2021, the China Banking and Insurance Regulatory Commission formulated the measures for the management of liquidity risk of financial products of financial management companies (hereinafter referred to as the measures), which will come into force five months after the date of promulgation.
Content: the measures fully learn from the regulatory practice at home and abroad and clarify and standardize the key points of liquidity control of financial products. There are 45 articles in seven chapters, including general provisions, governance structure and management measures, investment and transaction management, subscription and redemption management, cooperative organization management, supervision and management and supplementary provisions. The first chapter is "General Provisions", which defines the legislative basis, scope of application, relevant definitions, basic requirements, supervision and management, etc. The second chapter, "governance structure and management measures", stipulates the responsibilities of liquidity risk management department, investment management department and assessment and accountability mechanism, and puts forward the requirements of liquidity risk management system and measures and information disclosure. Chapter III "investment transaction management" puts forward specific requirements such as prudently determining the product operation mode, continuously monitoring the product liquidity risk, prudently evaluating the valuation and liquidity of assets, and strengthening interbank financing and collateral management. Chapter IV "subscription and redemption management" defines the use and treatment methods of subscription and redemption risk response measures. The fifth chapter, "management of cooperative institutions", defines the responsibilities of the management subjects of cooperative institutions and the management requirements for different cooperative institutions. The sixth chapter is "supervision and management". Chapter VII is "Supplementary Provisions".
Impact: the formulation of the measures is a specific measure for the CBRC to implement the system requirements such as the guiding opinions on standardizing the asset management business of financial institutions, the measures for the supervision and administration of financial management business of commercial banks, and the measures for the administration of financial management subsidiaries of commercial banks. It fills the institutional gap of liquidity risk management of wealth management companies. The overall design idea of the measures is to run liquidity risk management through the whole flow of financial business operation. By establishing special liquidity management regulations for financial products, the rule system of financial companies has been further improved, which helps to urge financial companies to improve liquidity management mechanism, improve management ability, and better promote the net worth transformation of financial products. At the same time, protect the legitimate rights and interests of investors. Standardizing the liquidity management of financial products, improving the capital cashing ability, preventing passive realization of assets and reducing the net value of products are not only conducive to protecting the rights of investors to apply for and redeem products, but also conducive to protecting the legitimate rights and interests of investors from damage and fair treatment. The measures also help maintain the stability of the financial market. Financial products are promoting the transformation of net worth, increasing their association with financial markets and other asset management products, and putting forward higher requirements for product liquidity management. The introduction of the measures will help urge institutions to strengthen product liquidity management and better prevent risk cross market and cross product infection.
Risk tips: the comments are only for the released documents, and the specific implementation needs to refer to the relevant implementation rules
