16 May 2016
PBOC Further Regulates Access of Qualified Institutional Investors to Interbank Bond Market
In order to regulate and develop the bond market as well as enhance market efficiency, the People’s Bank of China (PBOC) has issued a notice setting out clear rules governing the access of qualified institutional investors to the interbank bond market.
According to PBOC, China’s central bank, steps will be taken to conduct on-site and off-site inspections of the bond trading business of qualified institutional investors. Should qualified institutional investors be found to have committed acts in violation of laws and regulations, PBOC will, in accordance with law, handle the matter and report to the competent supervisory departments or refer the case to the relevant department for investigation and appropriate action.
In recent years, PBOC has been devoting great efforts to nurturing and developing a team of qualified investors in the interbank bond market. At the end of 2014, the Financial Market Department of PBOC issued a document setting out detailed regulations governing the access of rural financial institutions and four kinds of non-corporate-type investors to the interbank bond market.
Lately, PBOC further clarified the criteria and scope of qualified institutional investors classifying such investors into corporate-type qualified domestic institutional investors and non-corporate-type qualified institutional investors. Corporate-type qualified institutional investors include, but are not limited to, financial institutions approved by the financial supervisory department such as commercial banks, trust companies, corporate finance companies, securities companies, fund management companies, futures companies and insurance companies.
Meanwhile, non-corporate-type qualified institutional investors include, but are not limited to, securities investment funds, bank wealth management products, and trust schemes. PBOC pointed out that insurance products, private investment funds filed with the Asset Management Association of China, housing provident fund, social security fund, enterprise annuity, pension fund, charity fund etc will be managed according to the regulations applicable to non-corporate-type qualified institutional investors.
For non-corporate-type qualified institutional investors, PBOC stipulated that the manager of their products must obtain approval from the financial supervisory department and must possess asset management business qualification. As to private fund managers registered with the industry self-discipline organisation, their net assets may not be less than Rmb10 million and that the scale of paid-up assets under their management must rank among the top in the industry.
PBOC emphasised that the managers and custodians of corporate-type qualified institutional investors and non-corporate-type institutional investors must make continuous efforts to strengthen the building of various systems (such as internal control), improve department and post establishment, enhance the competencies of relevant staff, and prevent the institutions and individuals concerned from making use of their capacity to undermine the legal rights and interests of investors and clients.