CBRC announces new rules for trust products
Print Edition
IN a move to curb risks from “shadow banking,” China’s banking regulator has issued new rules to regulate non-financial companies that sell trust plans on the sly.
Trust companies are banned from sending product information to random customers via public advertisements or text messages. Trust products can only be sold in private placements, according to the rules issued by the China Banking Regulatory Commission.
Investing in private placements requires high risk tolerance, low liquidity concerns and long-term commitment. Therefore the offering may only be available to institutional investors and high net-worth individuals who can afford to lose their entire investment.
According to the new rules, trust companies are also prohibited from selling products via agencies, such as third-party wealth-management companies.
The recent default and bailout cases of trust products have made headlines, raising the alarm for regulators, who now want shadow bankers to be placed under stricter scrutiny for the protection of investors and market stability.
In China, trust companies play a big part in the shadow banking system that lend money to industries that banks are reluctant to tap.
Non-bank lending accounted for 60 percent of the country’s GDP last year, which was more than double from the 28.3 percent in 2009, United Overseas Bank said in a latest report.
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