What’s new: China finalized new rules that are set to bring about a broad overhaul and more effective oversight for the country's $3 trillion trust industry.
The China Banking and Insurance Regulatory Commission (CBIRC) issued the final version of rules Wednesday on trust business classifications, to take effect June 1.
Under the new rules, trust businesses would be divided into three categories — asset management, asset servicing and charitable trusts — and would be subject to different regulatory requirements.
Companies will have three years to adjust their businesses to the new rules and exit unqualified operations. The CBIRC demanded that trust companies submit business classification reports and adjustment plans to the regulator within 30 days after the new rules go into effect.
The final document remained largely unchanged from a previous draft version sent to the industry in late 2022. Minor tweaks were made to lift the priority of asset servicing trusts and added a notion of innovative asset servicing trust products. Analysts said the changes reflect regulators’ emphasis on asset servicing trust development and related innovation.
The context: The CBIRC in April 2022 released draft rules to categorize trust businesses with specific requirements. An updated version was issued in December for further industry comments.
The trust industry has been a focus of China’s financial risk crackdown over the past few years following a series of crises at Sichuan Trust Co. Ltd., Shanghai-traded Anxin Trust Co. Ltd. and others. For years, the industry has provided an alternative funding source for companies that have difficulty borrowing elsewhere.
https://www.caixinglobal.com/2020-07-13/sichuan-trust-to-sell-its-offices-in-desperate-bid-to-repay-debt-101579337.html
https://www.caixinglobal.com/2020-03-25/exclusive-anxin-trust-restructuring-imminent-as-debts-mount-101533975.html
Authorities have issued several regulations to govern trust companies and their business operations, telling trust companies to reduce the size of their channeling businesses, shrink the size of their noncompliant financing businesses and ramp up the disposal of risky assets.
As of the end of 2022, total assets managed by the trust industry rose 2.87% from the previous year to 21.1 trillion yuan ($3 trillion), according to the latest data from the China Trustee Association.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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