CHINA’S securities regulator has introduced new restrictions for financial institutions seeking to outsource fund management to external fund managers, the Securities Times said yesterday, as the government tightens shadow banking.
Financial institutions such as banks and insurers have been giving fund-management mandates for funds exceeding 1 trillion yuan (US$145 billion) to mutual fund houses as they outsource their wealth-management operations, the newspaper said.
Regulators are worried that such funds are used as a shadow banking channel by lenders to make risky bets in corporate bonds or equities, without effective management by the external fund house.
To prevent this, the China Securities Regulatory Commission has issued rules requiring funds where single institutions control 50 percent or more to operate as closed-end funds, and barring them from getting subscriptions from individual investors, according to the report.
Mutual fund houses, their senior executives or fund managers must also invest at least 10 million yuan into such funds, hold the stake for at least three years, and operate independently, the newspaper said.