China’s own Dodd-Frank Act aims to tame wealth management sector as crackdown on risky financial activity gathers pace
New set of restrictions could have wide-ranging impact by curbing the products financial institutions can offer and the clients they can serve
China’s financial watchdogs have unveiled a major new regulation – described as Beijing’s Dodd-Frank act – to rein in shadow-banking activities, responding to President Xi Jinping’s call to reduce financial risks.
The country’s off-balance sheet businesses – including banks’ wealth management products for retail investors, trust investment schemes and mutual funds – with a total value of 100 trillion yuan (US$15 trillion) will fall under the scope of the new draft jointly released by the People’s Bank of China and the country’s banking, securities and insurance regulators on Friday.
While the new regulations are a ministerial-level set of rules, they are set to have a far-reaching impact on China’s financial world similar to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into federal law by former US president Barack Obama in July 2010.
The US legislation was introduced in the wake of the financial crisis and was designed to improve consumer rights and improve accountability and transparency in the financial sector.
The draft Chinese legislation, posted on the central bank website for public feedback, may put an end to China’s extraordinary financial exuberance over the last decade by restricting what clients financial institutions can serve and what products they can buy.
