China Merchants Securities moves into custody
02 January 2013 Shenzhen
Image: Shutterstock
A securities company is offering custody services to private equity funds, making it the first to do so in China.
Banks dominate fund custody in China, with 18 offering services. They have 1100 funds that are worth RMB 2.37 trillion ($433 billion) under custody.
China Merchants Securities launched its custody service on 28 November after obtaining approval from the China Securities Regulatory Commission (CSRC).
The service will see China Merchants Securities provide its private equity fund clients with asset custody, netting, investment liquidation, investment monitoring, custody reporting, risk evaluation and management, and back office outsourcing.
The move comes as the country works to open up fund custody to foreign banks.
The CSRC sought public comment on draft rules on October 31 that would change custodian qualification to “boost the market-based competition in the fund custody industry”, according to a statement.
It plans to open up the market, allowing foreign banks to act as fund custodians as long as they comply with prudent supervisory requirements.
But the commission also wants to raise the qualification threshold and improve withdrawal measures.
To qualify as custodians, banks in China must have at least RMB 2 billion ($321 million) in net assets for three years in a row and meet capital requirements, according to the draft rules.
They also specify statutory obligations for custodians and improve internal control and accountability requirements.
Banks dominate fund custody in China, with 18 offering services. They have 1100 funds that are worth RMB 2.37 trillion ($433 billion) under custody.
China Merchants Securities launched its custody service on 28 November after obtaining approval from the China Securities Regulatory Commission (CSRC).
The service will see China Merchants Securities provide its private equity fund clients with asset custody, netting, investment liquidation, investment monitoring, custody reporting, risk evaluation and management, and back office outsourcing.
The move comes as the country works to open up fund custody to foreign banks.
The CSRC sought public comment on draft rules on October 31 that would change custodian qualification to “boost the market-based competition in the fund custody industry”, according to a statement.
It plans to open up the market, allowing foreign banks to act as fund custodians as long as they comply with prudent supervisory requirements.
But the commission also wants to raise the qualification threshold and improve withdrawal measures.
To qualify as custodians, banks in China must have at least RMB 2 billion ($321 million) in net assets for three years in a row and meet capital requirements, according to the draft rules.
They also specify statutory obligations for custodians and improve internal control and accountability requirements.
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