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China tells some banks to further cut amount of cash-management products sold

by Mike Robinson

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SHANGHAI/BEIJING – Chinese regulators told wealth management arm of national banks to cut back on the cash-management products that they sold, according to three people familiar with the matter. The move was made to minimize liquidity risks in the case of huge redemptions.

According to Reuters, bank units must reduce their cash management product (CMP) portfolio to 40% by December. The ratio should then be reduced to 30% by 2022. The equivalent to money market funds, CMPs have been relatively loosely regulated until now.

People spoke under the condition that they were not allowed to identify banks affected and did so on condition of anonymity.

China’s financial regulators tighten rules for the $1.1 trillion CMPs-sold by commercial banks market since 2020.

In June, the China Banking and Insurance Regulatory Commission enacted rules that impose stricter pricing requirements and investment durations.

One of three sources said that regulators are worried about liquidity risk. One source said that several banks large and unnamed have significant outstanding CMPs. They are also under increasing pressure to shrink their sizes.

According to another source, banks had been controlling CMPs exposures since March-June.

CBIRC did not immediately respond to inquiries for comment.

($1 = 6.4356

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