China's watchdog tightens rules for $1 trillion cash management market

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China's banking and insurance regulator issued rules on Tuesday on wealth management products for cash, tightening oversight of the $1 trillion market.

China Banking and Insurance Regulatory Commission banned such products from investing in stocks and convertible bonds and said the leverage level of each product should not exceed 120% normally, according to a statement on the regulator's website.

The regulator also asked commercial banks and wealth management companies to conduct stress tests on such products to make sure they could deal with urgent redemptions. The products regulated are those investing in monetary market instruments only and open for purchases and redemption on every trading day, the statement said.

The size of wealth management products for cash totalled 7.34 trillion yuan as of the end of March, according to China Banking Wealth Management Registration and Depository Center.Subscribe for our daily curated newsletter to receive the latest exclusive Reuters coverage delivered to your inbox.

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