China's National Financial Regulatory Administration has formally published interim measures to tighten oversight of commercial banks’ custody business and promote more standardised operations. The rules set baseline requirements for how banks provide custody services to a wide range of financial products and special-purpose funds, with a focus on clearer custodian responsibilities, stronger governance and risk controls, and greater transparency. The measures define custody as services provided by commercial banks as independent third parties, requiring adherence to principles including good faith, due diligence, independence and prudence, and risk segregation to safeguard the independence of custodial assets. Structured in five chapters and 49 articles, the framework specifies custodial duties and management requirements covering governance architecture, business independence and segregation, authorisation controls, business access, marketing practices and data protection, alongside supervisory tools such as ongoing supervision, enforcement and data reporting. Banks must sign custody contracts with clear and compliant terms and adequate risk disclosure, and when a product’s investment scope includes non-standard assets such as non-standard debt claims or unlisted equity, banks are expected to conduct capability-based assessments of product managers and product features and take reasonable measures to fulfil custodial duties and control custody-related risks. The measures also list prohibited responsibilities and conduct, including bearing the credit or market risk of custodial assets, providing explicit or implicit guarantees, promising principal or returns, advancing funds or providing liquidity support (with a stated carve-out for eligible collateral management of fixed-income marketable securities under market- and law-based principles), making financing commitments, participating in investor suitability management or managers’ investment decisions, and commingling custodial assets with other assets. Transitional arrangements for implementation are included, without specific details provided in the release.
China Banking and Insurance Regulatory Commission 2025-12-12
China's National Financial Regulatory Administration issues interim supervisory measures for commercial banks’ custody business
China's National Financial Regulatory Administration has issued interim measures to enhance oversight of commercial banks' custody business, emphasizing standardized operations, custodian responsibilities, governance, risk controls, and transparency. The framework requires adherence to principles of good faith, due diligence, and risk segregation, prohibiting banks from assuming credit or market risk of custodial assets. It also details prohibited conduct and includes transitional arrangements for implementation.