Financial institution compliance for wealth administration subsidiaries

Financial institution compliance for wealth administration subsidiaries

Financial institution compliance for wealth administration subsidiaries

Establishing financial institution wealth administration subsidiaries (BWMS) is a crucial means for business banks to strengthen danger isolation administration and implement skilled operation, and in addition an necessary measure to adjust to the final development of wealth administration, successfully implementing necessities of the the Guiding Opinions on Regulating the Asset Administration Enterprise of Monetary Establishments (new asset administration guidelines) issued in 2018 to enhance and promote a extra secure framework and cut back shadow banking dangers in China.

As of June 2022, 29 BWMS have now been authorised to be established, together with 25 Chinese language funded BWMS and 4 Sino-foreign three way partnership BWMS.


When establishing BWMS, the {qualifications} and enterprise capacities of shareholders, particularly initiators and controlling shareholders, are of nice concern and strictly examined by regulators.

The Measures for the Administration of Wealth Administration Subsidiaries of Industrial Banks emphasise that controlling shareholders ought to meet the circumstances of “good regulatory score” and “standardised and secure operation of wealth administration enterprise”. Particularly, they insist on “no materials violation of legal guidelines and laws previously two years”, or that any rectification has been recognised by the regulator.

The above-mentioned “violation of legal guidelines and laws” usually refers to violating the Legislation on Regulation of and Supervision over the Banking Trade (Amended in 2006), the Industrial Financial institution Legislation, and different legal guidelines and administrative laws.

It additionally references the brand new asset administration guidelines, the Measures for the Supervision and Administration of Wealth Administration Enterprise of Industrial Banks, and different regulatory provisions, all of which goal to stop significantly endangering the secure operation of banks or damaging professional rights and pursuits of traders.

By way of enterprise capability, the wealth administration enterprise of controlling shareholders of BWMS ought to meet the next necessities: a wealth administration enterprise division established to implement centralised and unified administration of its wealth administration enterprise; a wealth administration enterprise division in operation for greater than three years with an organisational construction with separate entrance, center and again workplaces, clear tasks and efficient checks and balances; and a transparent improvement technique and marketing strategy in place.

Throughout preparation of the institution and software, these necessities needs to be actually, comprehensively and fully mirrored in related software materials together with the applying type, feasibility examine report, investor’s description of the essential scenario and acceptance of supervision, in addition to authorized opinion on the legality and compliance of the applicant’s qualification.


Key regulation within the banking and insurance coverage business goals to enhance high quality and effectivity of company governance, promote scientific and wholesome improvement, strengthen supervision over company governance, and regulate the behaviour of main shareholders. In making use of for institution of BWMS, related requirements in these fields are additionally conditions for approval.

For instance, it’s prohibited for firms with “apparent defects in company governance construction and mechanism” and “quite a few associates, difficult and opaque fairness relations, frequent and irregular linked transactions” to be shareholders of BWMS.

To keep away from issues comparable to over-complicated construction, linked transactions or conflicts of curiosity, the variety of BWMS wherein the identical investor, its associates and concerted actors maintain shares shouldn’t exceed two, whereas the variety of BWMS wherein they management shares shouldn’t exceed one. That is generally often known as the “shareholding in two and share-controlling in a single” restriction.

As for regulation over main shareholders’ behaviour, along with implementing related necessities of the Measures for the Administration of Wealth Administration Subsidiaries of Industrial Banks, the institution of BWMS also needs to adjust to related provisions of the Tips on Company Governance of Banking and Insurance coverage Establishments, and the Measures for the Regulation of the Behaviour of Main Shareholders of Banking and Insurance coverage Establishments (for Trial Implementation).

Specifically, the father or mother financial institution (because the initiator and controlling shareholder) is required to correctly train shareholders’ rights via company governance procedures to safeguard impartial operation of BWMS. Except in any other case supplied by legal guidelines and laws, it’s strictly forbidden to improperly intervene in or limit the operation of BWMS in sure methods.

These embrace: organising procedural prerequisite for approval of resolutions of the shareholders’ assembly and the board of administrators; intervening in regular hiring procedures of workers, or straight appointing or eradicating workers with out authorisation from the shareholders’ assembly and board of administrators; intervening in efficiency analysis of administrators, supervisors and different workers; intervening in regular enterprise decision-making procedures; intervening in monetary and accounting actions comparable to monetary accounting, fund mobilisation, asset administration and expense administration; and issuing enterprise plans or directions to BWMS.

Subsequently, within the software materials, the draft articles of affiliation, capital contribution settlement, description of investor associates, the assertion and dedication by authorized consultant of the investor, and different paperwork ought to absolutely cowl and implement the above-mentioned regulatory necessities.


In line with the present regulatory approval course of, the institution of BWMS is split into two phases – preparation and opening – and the work contents of those two phases are totally different.

From the attitude of regulatory evaluate, the institution work within the software and preparation stage needs to be primarily thought of from the general organising of BWMS, particularly the demonstration on necessity and feasibility, in addition to consolidating the {qualifications} of traders, promoters and shareholders.

On the stage of software for enterprise opening, the associated work ought to primarily concentrate on all-round enterprise opening preparations by the preparatory organisation. These embrace enterprise tips and plans, organisational construction, division of labour amongst departments, {qualifications} of administrators and officers, workers and their working expertise, data system development and workplace premises association, and many others., in addition to the institutional development of company governance, enterprise administration, danger administration, inner management and complete administration.

As for timing, the regulator will make a written determination on whether or not to approve the institution inside 4 months of receiving software supplies for institution of BWMS, and 6 months from the date of approval would be the “preparation interval”. Inside two months from accepting software supplies for enterprise opening, the regulator will make a written determination on whether or not to approve, whereas BWMS ought to begin enterprise inside six months from acquiring the enterprise licence.

At each phases, it’s potential to use for an extension, however it’s essential to submit an extension report back to the regulator one month earlier than the expiration of the time restrict. In any other case, the approval paperwork will turn out to be invalid and the licence will probably be cancelled.

Enterprise Legislation Digest is compiled with the help of Baker McKenzie. Readers shouldn’t act on this data with out in search of skilled authorized recommendation. You possibly can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at [email protected]