Commercial Banks to Launch Fund Management Companies

By Christophe Han, Charles Qin and Stanley Cha, Llinks Law Office, Shanghai and Beijing

Following an extended period of solicitation of opinions and a heated debate on the issues of commercial bank's incorporation of fund management companies, the People's Bank of China (PBOC), the China Banking Regulatory Commission (CBRC) and the China Securities Regulatory Commission (CSRC) jointly formulated and promulgated theAdministration of Pilot Projects for the Establishment of Fund Management Companies by Commercial Banks Measures(the New Measures)(商业银行设立基金管理公司试点管理办法), to allow some pilot commercial banks to launch fund management companies.

Before the promulgation of the New Procedures, commercial banks could only act as fund custodians or fund distribution agents and were not allowed to take any equity shares in fund management companies. The promulgation of the Tentative Procedures is definitely good news for those commercial banks that are looking forward to stepping into the securities investment fund business. It is reported that a number of commercial banks have already submitted initial applications to establish fund management companies and that the relevant regulators have already started to review the applications. The first fund management company with a commercial bank as its major shareholder is likely to come into existence soon.