CSRC tightens controls on money market funds

24 February 2014   Category: News, Asia, China, Global   By Hui Ching-hoo

The China Securities Regulatory Commission (CSRC) is poised to issue a set of rules to regularise the trading of money market funds (MMFs), according to a report on financial website caixin.com.

This move follows Mainland ecommerce giant Alibaba Group teaming up with Tianhong Asset Management to launch China’s first online MMF, the Tianhong Zenglibao Monetary Fund, via internet investment platform Yu’ebao in June 2013.

Since then, similar types of MMFs have mushroomed in China; accumulated assets under management for online MMFs has gone past the 1 trillion RMB (US$158.7 billion) mark, which is equivalent to one third of total PRC mutual fund AUM.  

The CSRC is concerned about the potential high-risk exposure associated with online MMFs as their investment is heavily linked to deposit agreements, and investors could also be exposed to default risk from the banks.

As such, the regulatory watchdog will issue a manuscript ruling funds will have to raise their collateral requirements in align with the outstanding interest payments stipulated in deposit agreements in order to mitigate risk.