CSRC is­sues regs to con­trol sub­sidiaries’ risks

China Daily (Hong Kong) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

China’s se­cu­ri­ties reg­u­la­tor re­leased two reg­u­la­tions that will stan­dard­ize the busi­nesses and con­trol risks of the sub­sidiaries of fund man­age­ment com­pa­nies .

“The reg­u­la­tions will sig­nif­i­cantly im­prove risk con­trol of the sub­sidiaries of fund man­age­ment com­pa­nies. Net cap­i­tal will be a key risk con­trol in­dex,” said Deng Ge, a spokesman of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion at a news con­fer­ence on Fri­day.

The draft reg­u­la­tion states that the net cap­i­tal of a sub­sidiary of a fund man­age­ment com­pany should be no smaller than 100 mil­lion yuan ($14.5 mil­lion). The net cap­i­tal should also be no less than 40 per­cent of a sub­sidiary’s net as­sets and no less than 20 per­cent of its li­a­bil­i­ties.

The tran­si­tion pe­riod of the reg­u­la­tion on sub­sidiaries’ risk con­trol will be 18 months, but all of their risk con­trol in­dexes should meet half of the re­quire­ments in 12 months.

Deng said the reg­u­la­tor will deal with busi­nesses of sub­sidiaries of fund man­age­ment com­pa­nies dif­fer­ently and pay at­ten­tion to those with high risks.

Some sub­sidiaries of fund man­age­ment com­pa­nies be­came “chan­nels” of com­mer­cial banks to of­fer loans for some risky en­ter­prises. A so-called “chan­nel” in­sti­tu­tion is a sub­sidiary of a fund man­age­ment com­pany that lends its li­cense to make prof­its. “Chan­nel busi­nesses will be largely curbed by the new reg­u­la­tions,” said Liu Achang, an in­vest­ment man­ager at Bei­jing­based JD Cap­i­tal.

In 2012, the reg­u­la­tor al­lowed mu­tual funds to set up sub­sidiaries in a bid to ex­pand and di­ver­sify their in­vest­ment scope. But, the op­er­a­tion of these sub­sidiaries has largely ex­isted in a reg­u­la­tory void.

Separately on Fri­day, the Shang­hai and Shen­zhen ex­changes expanded from 873 to 950 the num­ber of stocks that are al­lowed to be traded on mar­gin, mean­ing that in­vestors are al­lowed to bor­row money for stock pur­chases. Deng, the CSRC spokesman, said the move is to di­ver­sify the trad­ing stock va­ri­eties and to al­low inves- tors to have more choices.

Mean­while, China’s se­cu­ri­ties reg­u­la­tor also plans to al­low more re­gional equity ex­changes de­signed for small busi­nesses, as the govern­ment steps up fi­nanc­ing sup­port to the seg­ment of the econ­omy most hit by slow­ing growth, Bloomberg re­ported, cit­ing peo­ple with knowl­edge of the mat­ter.

Draft rules have been sub­mit­ted to the State Coun­cil that would per­mit prov­inces with­out the venues — which al­low trad­ing of equity in pri­vate com­pa­nies — to set one up, said the peo­ple, who asked not to be named as no fi­nal de­ci­sion has been made.

Bloomberg con­trib­uted to this story.

AN XIN / FOR CHINA DAILY

Chi­nese em­ploy­ees of McDonald’s take a selfie at a pro­mo­tion event in Nan­jing, Jiangsu prov­ince.

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